JAGATJIT INDUSTRIES LIMITED
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of Jagatjit Industries 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, notes to the standalone financial statements, including a summary of the significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 [“the Act"] in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies [Indian Accounting Standards] Rules, 2015, as amended, [“Ind AS"] and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31,2024, the profit and total comprehensive income, changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing specified under section 143[10] of the Act [SAs]. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India [ICAI] together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical
responsibilities in accordance with these requirements and the ICAI's Code of Ethics.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
Emphasis of matter:
We draw attention to the below mentioned notes to the accompanying standalone financial statements which more fully describes the matters.
Note No 6[ii] regarding loan due from an ex-employee, Note No 22[ii] and 22[iii][b] regarding items of exceptional nature.
Our opinion is not qualified in respect of these matters.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements for the 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. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the standalone Ind AS 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 of material 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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The Key Audit Matter
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How the matter was addressed in our audit
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1) Litigation Matters:
[as described in note 32 of the financial statements]
The company operates in various states within India, exposing it to a variety of different Central and State Laws, regulations and interpretations thereof. In this regulatory environment, there is an inherent risk of litigation and claims.
Consequently, provisions and contingent liability disclosures may arise from direct and indirect tax proceeding, legal proceedings including regulatory and other government/department proceedings, as well as investigations by authorities and commercial claims.
At March 31,2024, the Company's contingent liabilities for legal matters were ' 1756 Lakhs.
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Our procedures included the following:
• Understanding of the Company's process with respect to completeness and recognition of tax, contingencies/ claims and provisions.
• Read relevant tax laws and discussed with the management, to understand the underlying matters in the demand orders / notices and basis for management judgement and estimates
• Included tax specialists in our team to perform an evaluation of assumptions used by the management and relevant judgements passed by the authorities, including the interpretation of the relevant tax laws.
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The Key Audit Matter
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How the matter was addressed in our audit
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The most significant contingent liability pertains to protective disallowance of sales promotion expenses of ' 3002 lakhs and substantive disallowance of purchases of ' 107 lakhs related to AY 2011-12 to 2013-14 .
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• Perused the orders of Assessing officer Appellate authorities and the related Jurisdictional High Court judgment on the matter substantially in favour of Company. Assessed the related disclosures in the standalone financial statements for compliance with disclosure requirements.
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2) Revenue recognition from sale of products/ Royalty and Franchise agreements
(Note no 21 of the standalone financial statements)
Revenue from sale of products is recognised when control of products has been transferred to the customer and there is no unfulfilled obligation that could affect the customer's acceptance of the products. Revenue from sale of products is measured at the fair value of the consideration received or receivable, net of returns and allowances, discounts and incentives. Revenue generated on account of Royalty as per commercial agreements is subject to waiver in respect of Minimum Guarantee Quantum based on the premise of commercial expediency.
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Our procedures included the following:
• Assessed the Company's revenue recognition accounting policy for sale of products/ royalty and franchise business including those relating to discounts and incentives.
• Understood, evaluated and tested on sample basis the design and operating effectiveness of key internal controls over recognition and measurement of revenue, discounts, and incentives.
• Performed test of details on a sample basis and inspected the underlying accounting documents relating to sales and accrual of discounts and incentives.
• Tested on a sample basis, sales transactions during the year.
• Performed analytical procedures on revenue on all streams.
• Assessed the disclosures in the standalone financial statements in respect of revenue, discounts and incentives for compliance with disclosure requirements.
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3) Provision for trade receivables
(as described in note 10 of the standalone financial statements)
Trade receivable balances of ' 7650 lakhs represent significant portion of the total assets as at March 31,2024. Provision for expected credit loss at reporting date is significant at ' 3509 lakhs. Trade receivables include dues from state government corporations, distributors, retailers, contract manufacturing units and franchise partners. The Company records expected credit loss for unsecured trade receivables based on defined policy following simplified approach and wherever management considers necessary applying its judgment and estimates. At the reporting date provisions are reviewed. No significant provision for expected loss is made during the year. The state corporations make deductions in respect of various claims which are accounted on receipt of confirmations.
Timing of collection of dues from customers may differ from the contractual credit period. Significant judgment is involved in management estimates of the amounts unlikely to be ultimately collected.
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Our procedures included the following:
• Understood, evaluated and tested on a sample basis the design and operating effectiveness of internal controls over trade receivables.
• Performed audit procedures on existence of trade receivables, which included reading and comparing balance confirmations with books of account, testing subsequent receipts and testing sales transactions on a sample basis.
• Evaluated the assumptions used by management to calculate the expected credit loss for trade receivables through audit procedures which included analysis of ageing, past trend of bad debts write-off.
• Assessed the disclosures in the standalone financial statements for compliance with disclosure requirements
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Information Other than the Standalone Financial Statements In connection with our audit of the standalone financial statements, and Auditor’s Report Thereon our responsibility is to read the other information and, in doing so,
The Company's management and Board of Directors are responsible consider whether the other information is materially inconsistent with for the preparation of the other information. The other information the standalone financial statemente °r °ur knowledge during comprises the information included in the Management Discussion the course of our audit or otherwise appears to be materially and Analysis, Board's Report including Annexures to Board's Report, misstated. 'n connection with the information included in the Annual Corporate Governance Report etc. included in Annual Report, but does report ie Directors Report, Management Discussion and Analysis,
not include the standalone financial statements and our auditor's Corporate Governance Report, if based on the work we have
report thereon performed, we conclude that there is a material misstatement ol
this other information, we are required to report this fact. We have
?ur opinion on the standalone financial statements does not cover nothing to report in this regard. the other information and we do not express any form of assurance
conclusion thereon.
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Management’s Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS 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 the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
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.
The 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
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
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.
Ý Obtain an understanding of internal financial controls 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 system 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.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
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 standalone 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
1 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 read with our remarks for certain matters in respect of audit trail as stated in paragraph 1(i)(vi) below.
(c) The standalone balance sheet, the standalone statement of profit and loss including other comprehensive income, the standalone statement of changes in equity and the standalone statement of cash flow dealt with by this report are in agreement with the books of account.
(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act read with Companies [Indian Accounting Standards] Rules 2015, as amended.
(e) On the basis of the written representations received from the directors taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2024 from being appointed as a director in terms of Section 164 (2) of the Act;
(f) The modifications relating to the maintenance and other matters connected therewith in respect of audit trail are as stated in the paragraph 1(b) above on reporting under section 143 (3) (b) of the Act and paragraph 1(i)(vi) below on reporting under Rule 11 (g) of the Companies (Audit and Auditors) Rules, 2014.
(g) 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 A”; and
(h) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act read with schedule V, as amended, in our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the 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 read with schedule V of the Act, The Ministry of Corporate Affairs has not prescribed other details under section 197(16) of the Act which are required to be commented upon by us.
(i) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations as at 31.03.2024 on its financial position in its standalone financial statements. (Refer Note 32 of the 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 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, no funds (which are material either individually or in the aggregate) 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 or entity, including foreign entity (“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, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity (“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;
(c) Based on the audit procedures 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 (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
v. The Company has not declared or paid any dividend during the year and has not proposed final dividend for the year and therefore the requirement of compliance of Sec 123 of the Act are not applicable.
vi. Based on our examination which included test checks and in accordance with requirements of the Implementation Guide on Reporting on Audit Trail under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014, the Company has used accounting software's 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, where audit trail (edit log) facility was enabled and operated throughout the year, we could not verify instance of audit trail feature being tampered with during the
financial year 2023-24, during the course of audit and for this we relied upon the certificate of the management.
2. As required by the Companies (Auditor's Report) Order, 2020 (the “Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order.
For V. P. Jain & Associates
Chartered Accountants Firm's registration number: 015260N
Sarthak Madaan
Place : New Delhi Partner
Date : 31.07.2024 Membership number: 547131
UDIN: 24547131BKGYWR8338
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