We have audited the accompanying standalone financial statements of MANGALORE REFINERY AND PETROCHEMICALS LIMITED (“the Company”), which comprise the Standalone Balance Sheet as at 31st March 2024, and the Standalone Statement of Profit and Loss, (including other comprehensive income), the Standalone Statement of Changes in Equity and the Standalone Statement of Cash flows for the year then ended, and notes to the Standalone Financial statements, including a summary of the Material Accounting Policy Information 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 accounting principles generally accepted in India, including the (Indian Accounting Standards) Rules, 2015, as amended, (“Ind AS”) and the relevant rules issued thereunder, of the state of affairs of the Company as at 31st March 2024, and its profit (including other comprehensive income), changes in equity and 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 Auditors' 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 Companies Act, 2013 and the rules made there under, 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 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 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 auditors' responsibilities for the audit of the Standalone Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks 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.
|
Sr. No
|
The Key Audit Matters
|
Auditors' Response
|
|
1.
|
Property, Plant and Equipment - Refer Note No.5
There are areas where management judgement impacts the carrying value of property, plant and equipment, and their respective depreciation rates. These include the decision to capitalise or expense costs; the review of useful life and residual value on reporting date; the use of management assumptions and estimates for the determination or the measurement criteria for Property, Plant and Equipment (PPE) derecognised upon disposal, replacement, deduction and reclassification.
Due to the materiality in the context of the Balance Sheet of the Company and the level of judgement and estimates required, we consider this to be as area of significance.
|
We assessed the controls in place over the Property, Plant & Equipment, evaluated the appropriateness of capitalisation process, performed tests checks on costs capitalised, and the de-recognition criteria for assets disposed, replaced, and reclassified.
In performing these procedures, we reviewed the judgements made by management including the nature of underlying costs capitalised; the appropriateness of useful life and residual value considered for calculation of depreciation; the useful lives of assets prescribed in Schedule II to the Companies Act and the useful lives of certain assets as per the technical assessment of the management.
We observed that the management has regularly reviewed the aforesaid judgements and there are no material changes.
|
|
2.
|
Evaluation of Contingent Liabilities and Recoverability of pre-deposit thereto (Refer Note No 45)
Contingent liabilities disclosed are in respect of items which in each case are above the threshold limit. There are several claims and litigations pending before various forums against the company which have not been acknowledged as debt by the company and are disclosed as contingent liabilities. These claims and litigations involve significant judgment to determine the possible outcome of these disputes. In view of significant management estimate and judgement involved, we considered this as a key audit matter
|
The following audit procedures were carried out in this regard:
We examined items above the threshold limit for determination of contingent liabilities and obtained details of Excise, customs, VAT/ Sales Tax/ Entry Tax, Goods and Services Tax, Income tax assessments/demands as well as other disputed claims against the Company as on March 31, 2024. Obtained an understanding of the nature of litigations pending against the Company and discussed the developments during the year for key litigations with the management and legal department of the company.
We have assessed the Management's underlying assumptions in estimating the possible outcome of such disputed claims/ cases against the Company, based on records and judicial precedents made available.
|
|
3.
|
Recognition and measurement of Deferred Tax Assets (Refer Note No.25)
As per “Ind AS 12 - Income Taxes”, Deferred Tax Assets are the amount of income tax recoverable in future periods in respect of (a) deductible temporary differences (b) the carry forward of unused tax losses and (c) the carry forward of unused tax credits
A deferred tax asset shall be recognised for the carry forward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.
Determination of probable future taxable profit is a matter of judgment based on convincing evidence. Considering the management's involvement in estimation and judgment of determining the future taxable profits which have a degree of uncertainty, this matter has been determined as a key audit matter.
|
Our audit procedure included, but was not limited to the following:
Considered the company's past and current year's taxable profits, taxes paid, obtained details of carry forward losses under income tax and details of estimates of future taxable profits.
Tested the period over which the deferred tax assets on such unused tax losses and unused tax credits would be recovered against future taxable income.
Tested the management's underlying assumptions and judgments in estimating the probable future taxable profits and the existence of sufficient taxable temporary difference against which the unused tax losses or unused tax credits can be utilised by the company
Assessed the adequacy and appropriateness of the disclosures in the Standalone financial statements.
|
|
4.
|
Performance related pay
The provision for performance related pay for financial year 2023-24 is made based on Department of Public Enterprises (DPE) guidelines. The rating factors are yet to be approved by Board of directors.
|
The following audit procedures were carried out in this regard:
We have reviewed the circular issued by DPE and verified the computations shared by the management for FY 2023-24 to satisfy that the methodology as prescribed in the circular have been followed and the provision made is reasonable.
We have verified the evaluation report of Memorandum of Understanding (MOU) for the FY 2022-23 to determine reasonability of assumptions used for FY 2023-24.
|
Information Other than Standalone Financial Statements and Auditors' Report thereon
The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Company's Board of Director's Report including Annexure to Board of Director's Report, Management Discussion and Analysis, Business Responsibility Report, Corporate Governance and Shareholder's Information, but does not include the standalone financial statements and our auditors' report thereon. The above referred information is expected to be made available to us after the date of this auditors' report.
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 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 information, if, we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take appropriate actions necessitated by the circumstances and the applicable laws and regulations.
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 the Companies Act, 2013 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 accounting principles generally accepted in India, including the Indian Accounting Standards specified under Section 133 of the Act. 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 control that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statement that give true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone 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.
The Board of Directors is responsible for overseeing the company's financial reporting process.
Auditors' 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 auditors' 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 scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal controls 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 an 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 the 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 auditors' 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 auditors' 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 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 auditors' 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 (Auditors' Report) Order, 2020 (the “Order”) issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Companies Act 2013, we give in the “Annexure - A”, a statement on the matters specified in the paragraph 3 and 4 of the order, to the extent applicable.
2. Based on the verification of books of account of the Company and according to the information and explanations given to us, we give in “Annexure - B” a report on the directions issued by The Comptroller and Auditor General of India in terms of sub-section 5 of Section 143 of the Act.
3. The company does not have the required number of Independent Directors on its Board due to vacancy arising out of end of term of the existing independent directors, from September 2020 onwards hence being non-compliant with relevant Regulations of SEBI Listing Obligation and Disclosure Requirements (LODR) Regulations, 2015. Also refer Note No.56 to the Standalone financial statement.
4. 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 purpose 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;
c) The Standalone Balance Sheet, Standalone Statement of Profit and Loss (including other comprehensive income), the Standalone Statement of Cash Flows and the standalone statement of changes in Equity dealt with by this Report are in agreement with the books of account;
d) In our opinion, the aforesaid standalone financial statements comply with Indian Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.
e) In view of exemption given vide notification no. G.S.R. 463(E) dated June 5, 2015, issued by Ministry of Corporate Affairs, provisions of Section 164(2) of the Act regarding disqualification of directors, are not applicable to the Company, since it is a Government Company.
f) With respect to the adequacy of the internal financial controls with reference to financial statement of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure -C”.
g) As per Notification No GSR 463 (E) of Ministry of Corporate Affairs dated June 5, 2015, provisions of Section 197 of the Act as regards managerial remuneration are not applicable to the company, since it is a Government Company and
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, 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. 45 to the Standalone Financial Statements;
(ii) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
(iii) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company. Hence the question of reporting delay in depositing dues does not arisen.
(iv) a. The Management has represented that, to the best of its knowledge and belief, as disclosed in the Note 48.11 to the standalone financial statements, no funds 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(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, 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, as disclosed in the note 48.12 to the accounts, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, 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 performed that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e) of the Companies (Audit and Auditors) Rules, 2014, as provided under (a) and (b) above, contain any material mis-statement.
(v) The interim dividend declared and paid during the year by the Company is in compliance with Section 123 of the Act.
As stated in Note No.21.7 to the standalone financial statements, the Board of Directors of the Company have proposed final dividend for the year, which 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 has used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit, we did not come across any instance of audit trail feature being tampered with.
As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from April 1, 2023, reporting under Rule 11 (g) of the Companies (Audit and Auditors) 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 YCRJ & ASSOCIATES For BSJ & ASSOCIATES
Chartered Accountants Chartered Accountants
Firm Registration Number: 006927S Firm Registration Number: 010560S
Sd/- Sd/-
CA YASHAVANTH KHANDERI CA THOMAS MATHEW
Partner Partner
Membership No: 029066 Membership No: 224211
UDIN: 24029066BKAILT7924 UDIN: 24224211BKFDUG3767
Place: Bengaluru Place: Bengaluru
Date: 03-05-2024 Date: 03-05-2024
|