We have audited the accompanying standalone financial statements of THE LAKSHMI MILLS COMPANY 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 Cash Flow Statement and for the year then ended and notes to the financial statements including a summary of the material accounting policies and other accounting policies and other explanatory information (hereinafter referred to as the ‘standalone financial statements’).
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 Companies Act, 2013 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, its LOSS 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 in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.
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 of the current period. 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. 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 financial statements section of our report, including in relation to these matters.
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S. No.
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Key Audit Matter
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How our audit addressed the Key Audit Matter
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1
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Evaluation of uncertain tax positions
(Refer Note No. 30 to the standalone financial statements).
The Company has uncertain tax positions of Rs. 1031.79 Lakhs including matters under dispute which involves significant judgment to determine the possible outcome of these disputes as on the balance sheet date.
The Company assesses the need to make a provision or disclose a contingency on a case-to-case basis considering the underlying facts of each matter, in consultation with its legal advisors. This involves a high level of management judgment and assumptions which impact the risk assessment and consequential provisioning and disclosure of contingencies in the financial statements. This area is significant to our audit, since the completeness and accuracy of accounting and disclosures for contingencies is dependent on such management judgment and assumptions.
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Principal Audit Procedures
We obtained details of the completed tax assessments and demands and the statutory appeals preferred by the Company before appropriate appellate forums.
We evaluated and tested the Company’s processes and controls for monitoring of litigations, disputes, compliances and assessment thereof for determining the likely outcome of disputes. We reviewed the summary of the litigations obtained from the management and discussed the material cases to determine the Company’s assessment of the likelihood and magnitude of any liability that may arise.
We analysed the management’s underlying assumptions and grounds in estimating the tax provision and the possible outcome of the disputes at appellate forums.
We considered legal precedents, other rulings and legal opinions obtained by the management in evaluating the management’s judgments and assumptions on these uncertain tax positions. Additionally, we considered the effect of new information, if any, in respect of material uncertain tax positions and other uncertain position of the tax dues under dispute, to evaluate whether any change was required to management’s position on these uncertainties. We tested the adequacy of disclosures in the financial statements. We also obtained necessary representations from the management in regard to the provisioning and disclosures in respect of the litigations.
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2
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Recoverability of Income tax assets and Receivables
from Government authorities
(Refer Note 8 & 6A to the standalone financial
statements)
As at March 31, 2024 non-current assets in respect of Income tax assets to the extent of Rs.263.27 lakhs (Net of provisions), current tax assets to the extent of Rs. 217.02 Lakhs (Net of provisions) and balances with revenue authorities to the extent of Rs. 4.86 Lakhs are outstanding.
This area is significant to our audit, since the completeness and accuracy of accounting and disclosures for determining the recoverability of these items.
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Principal Audit Procedures
We analysed and reviewed the nature of the amounts recoverable, the sustainability and the likelihood of recoverability upon final resolution. The income tax assets represents tax deducted at source, the taxes paid in advance and taxes paid towards disputed dues.
The balances with revenue authorities represent input tax credits eligible for set off. We considered legal precedents, other rulings and legal opinions obtained by the management and the management’s representations in this regard, in evaluating the management’s judgments and assumptions on the recoverability / set off of these balances with revenue authorities.
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S. No.
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Key Audit Matter
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How our audit addressed the Key Audit Matter
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3
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Trade receivables and expected credit loss:
(Refer Note 10 to the standalone financial statements).
The trade receivables as at March 31, 2024 is Rs. 2236.17 Lakhs and provision for expected credit loss of Rs. 271.37 Lakhs.
The provision for the expected credit losses involves certain judgment with respect to the assessment of probabilities of default and recovery.
We have considered assessment of expected credit loss for receivables as a key audit matter because of the significant management judgement involved in its estimation and provision.
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Principal Audit procedures
We assessed the appropriateness of the accounting policy for expected credit loss as per the relevant accounting standards.
We obtained an understanding of and assessed the design, implementation and operating effectiveness of key controls relating to collection monitoring process, credit control process and estimation of expected credit losses.
We tested the controls relating to classification of the receivable balances included in the receivables ageing report.
We reviewed the ageing, tested the validity of the receivables, discussed with the management on the disputes, if any, with the customers, understood and evaluated the reason for delay in realization of the receivables and possibility of realization of the aged receivable.
We assessed the methodology used by management to estimate the expected credit loss provision and its compliance with the relevant accounting standard.
We assessed the reasonableness of estimate of expected credit loss and performed procedures relating to the accuracy of the inputs used.
We assessed the adequacy of disclosures relating to trade receivables and related credit risk.
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4
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Assessment of carrying value of Investments [Refer Statement of Changes to Equity and Note No.5 to the standalone financial statements]
The Company has invested in equity instruments that are stated at fair values through OCI and the cumulative fair value changes through OCI (net of deferred taxes) is Rs. 74,048.65 Lakhs as on March 31, 2024. In line with general market fluctuations, there are significant fair value changes in these investments. The evaluation of their fair values is considered as a key audit matter given the relative significance of the value of investments and the fluctuations in their fair values.
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Principal Audit Procedures
Our audit procedures in relation to assessing the carrying value of these investments include ascertaining from relevant appropriate external sources that the equity instruments are carried at fair value as on 31st March 2024.
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S. No.
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Key Audit Matter
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How our audit addressed the Key Audit Matter
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5
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Assessing the recoverability of the carrying value
of Investment property including investment
properties under construction
[Refer Note No.4 to the standalone financial
statements]
As at 31st March 2024, the carrying value of the Investment Property is Rs. 17,710.90 Lakhs and carrying value of Investment Property under construction is Rs. 35.40 Lakhs. The Company reviews on an annual basis such carrying values for any indicators of impairment to ensure that the Investment Properties are not carried at more than their recoverable amount.
We considered the assessment of the carrying value of Investment Property as a key audit matter due to the significance of the balance and significant estimates and judgments involved in the impairment assessment and disclosure of fair values.
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Principal Audit Procedures
Our audit procedures included, among other things the following:
We assessed the Company’s valuation methodology and assumptions based on current economic and market conditions in determining the recoverable amount.
We obtained and read the valuation report used by the Company’s management for determining the fair value (‘recoverable amount’) of the investment property.
We considered the independence, competence and objectivity of the external specialist involved by the management in determination of valuation.
We assessed the Company’s valuation methodology applied and compared key property related data used as input with historical actual data.
We assessed the key assumptions used in Company’s valuation methodology.
We compared the recoverable amount of the investment property to the carrying value in books.
We assessed the disclosures made in the financial statements in this regard.
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We have determined that there are no other key audit matters to communicate in our report.
Information Other than the standalone Financial Statements and Auditor’s Report Thereon
The Company’s Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Board’s Report including Annexures to Board’s Report, Report on Corporate Governance and Shareholder’s Information, but does not include the standalone financial statements and our 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 during the course of our 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
The Company’s Board of Directors is responsible for the matters stated in Section 134 (5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone financial statements that give a true and
fair view of the financial position, financial performance (including Other Comprehensive Income), Changes in Equity of the Company and its cash flows in accordance with the Indian Accounting Standards (IND AS) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, 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 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.
Auditors’ Responsibility
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 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 Companies Act, 2013, 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 financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the 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 standalone 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 standalone 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 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 “A” a statement on the matters specified in
paragraphs 3 and 4 of the Order, to the extent applicable.
2. As required by Section 143 (3) of the Act, based on our audit 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 appears from our examination of those books;
c) The Balance Sheet, the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity and Statement of Cash flows 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 Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015;
e) On the basis of the written representations received from the directors of the Company as on March 31, 2024 taken on record by the board of directors, none of the directors are disqualified as on March 31, 2024 from being appointed as a director in terms of Section 164 (2) of the Act;
f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in Annexure “B” and
g) 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, 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 Companies Act, 2013. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) which are required to be commented upon by us.
h) With respect to the other matters to be included in the auditors’ 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 No. 30 to the standalone financial statements.
ii. The Company does not have any long-term contracts including derivative contracts on which provision for material foreseeable losses is required to be made under any law or accounting standards;
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
iv. (a) The Management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, where applicable, 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, other than as disclosed in the notes to the accounts, where applicable, 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.
a) The dividend proposed for the previous financial year, declared and paid by the Company during the current financial year is in accordance with Sec. 123 of the Act, as applicable.
b) The Board of Directors of the Company have not proposed any dividend for the year ended March 31, 2024 and hence reporting whether the dividend proposed is in accordance with section 123 of the Act, does not arise.
vi. Based on our examination, which included test checks, the Company has used accounting software for maintaining its books of account for the financial year ended March 31, 2024 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 accounting software, except for standalone external software used for human resource management which is non-editable at database level. 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) Rules, 2014 is applicable from April 1, 2023, reporting under Rule 11(g) of the Companies (Audit and Accounts) 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 M/s Subbachar & Srinivasan
Chartered Accountants Firm Registration No.004083S (T.S.V.RAJAGOPAL)
Coimbatore Membership No. 200380
28th May, 2024 UDIN:24200380BKCFBN3516
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