We have audited the accompanying standalone financial statements of MMP INDUSTRIES LIMITED (the “Company”), which comprises the Balance Sheet as at March 31, 2024, the Statement of Profit and Loss (including the Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year ended on that date and notes to the standalone financial statements, including a summary of material 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, as amended, (“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, and its standalone profit including total comprehensive income (losses), its standalone cash flows and the standalone changes in equity for the year ended on that date.
Basis of Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs) 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 (“the 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.
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. 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 and 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. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risk of material misstatement of the standalone financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying standalone financial statements.
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The Key Audit Matters
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How was the matter addressed in our Audit
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Revenue Recognition (Refer Note No. 1.4.(d) and 29 of the Standalone Financial Statements)
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Revenue is one of the key profit drivers and is therefore susceptible to misstatements. Revenue is measured in net of any discounts and rebates. Revenue from sale of products is considered as key audit matter as there is a risk of accuracy of recognition and measurement of sales in the standalone financial statements considering the following aspects:
* Determination of performance obligation for recognition of revenue.
* Estimation of variable consideration in pricing.
* Cut-off is the key assertion in so far as revenue recognition is concerned, since an inappropriate cut-off can result in material misstatement of results for the periods.
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Our audit procedures with regards to revenue recognition is a combination of internal controls and substantive procedures which included the following:
* Evaluated the design of internal control.
* For evaluation of operating effectiveness of internal controls, tested revenue by verifying, on sample basis, agreements executed with the customers, relevant documentary evidence of satisfaction of performance obligation for timing of recognition of revenue, accuracy of revenue recognition including variable consideration included pricing, cut off transactions at the year end and tax amount of the invoices.
* Performed substantive testing by verifying the sales invoice and other relevant documentary evidence on sample basis.
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* Obtain the balance confirmation form selected samples and verified the reconciliation, if any, for the confirmation received.
* Evaluated the appropriateness of accounting policies, related disclosures made and overall presentation in the standalone financial statements.
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Capital Work-in-Progress / Property, Plants and Equipments
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The Company had embarked on a project on enhancement of Property, Plants and Equipments in “UMRED” and “BHANDARA”. The Value of such Property, Plant and Equipment capitalized during the reporting period is ' 2,552.12 Lakhs and ' 489.43 Lakhs. The project needs to be capitalized and depreciated once the assets are ready to use as intended by the Company’s management. Inappropriate timing of capitalization of the project and / or inappropriate classification of categories of item of Property, Plant and Equipment could results in material misstatement of Capital Work-in-Progress / Property, Plant and Equipment with a consequent impact on charge of depreciation and results for the period.
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Our audit procedures included testing the design, implementations and operating effectiveness of controls in respect of review of capital work-in-progress, particularly in respect of timing of the capitalization and recording of additions to items of various categories of Property, Plant and Equipment with source documentation, substantive testing of appropriateness of the cut-off date considered for project capitalization.
We tested the source documentation to determine whether the expenditure is of capital nature and has been appropriately approved and segregated into appropriate categories. We reviewed operating expenses to determine the appropriateness of accounting. Further, through sites visit, we physically verified the existence of capital work-in-progress / Property, Plant and Equipment.
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Existence and Valuation of Inventories
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The Company’s Inventories as at the end of the reporting period are ' 11,099.96 Lakhs representing 27.70% of the Company’s total assets. (Refer “Note No. 10” of the standalone financial statements)
The existence of inventories is a key audit matters due to involvement of high risk, basis the nature and size of the products where in value per unit is relatively insignificant but high volumes are involved which are distributed across different plants of the Company.
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In response to these key matters, our audit included, among
others, the following principal audit procedures:
* Understood the management’s control over physical inventory counts and their valuation.
* Evaluation of design and testing of the operating effectiveness of internal controls relating to physical inventory counts at the plants. In testing these controls, we observed the inventory cycle count process on a sample basis, inspected the results of the inventory cycle count and confirmed that the variances were approved and appropriately accounted for.
* Evaluation of design and testing of the operating effectiveness of internal controls relating to purchases, sales and inventories including the automated controls.
* We have performed the physical verification of inventories on a sample basis for establishing the existence of inventory as at the end of the reporting period.
* For a representative sample, verification that the finished goods inventories were correctly measured, using a recalculation of the measurement of those inventories based on the cost of acquiring them from suppliers and considering the costs of directly attributable to such goods.
* Assessed the key estimates used by the Company’s management to determine the net realizable value and the consistency thereof with the Company’s policy on provision for non-moving inventory and performed a sensitivity analysis on the estimated selling price and compared with the cost per item.
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Carrying Value of Trade Receivables
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As at March 31, 2024, trade receivables constitutes approximately 14.26% of total assets of the Company (Refer “Note No. 11” of the standalone financial statements). The Company is required to regularly assess the recoverability of its trade receivables.
The Company applied, expected credit loss (ECL) model for measurement and recognition of impairment loss on trade receivables. The Company uses a provision matrix to determine impairment loss allowances. The provision matrix is based on its historically observed default rates over the expected life of trade receivables and is adjusted for forwardlooking estimates.
This is a key audit matters as significant judgment is involved to establish the provision matrix.
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Our audit procedures included, among other the followings:
* Evaluated the Company’s accounting policies pertaining to impairment of financial assets and assessed compliance with those policies in term of Ind AS - 109, “Financial Instruments”.
* Assessed and tested the design and operating effectiveness of the Company’s internal financial controls over provision for expected credit loss (ECL).
* Evaluated the management’s assumption and judgment relating to various parameters which included the historical default rates and business environment in which the entity operates for estimating the amount of such provision.
* Evaluated the management’s assessment of recoverability of the outstanding receivables and recoverability of the overdue / aged receivables through inquiry with the management, and analysis of the collection trends in respect of receivables.
* Assessed and read the disclosures made by the Company in the standalone financial statements.
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Information Other than the Financial Statements and Auditor’s Report thereon
The Company’s Management and the Board of Directors are responsible for the other information. The other information comprises the information included in the Management’s Discussion and Analysis, Board’s Report including Annexure to the Board’s Report, Report on Corporate Governance, Business Responsibility and Sustainability Report and Shareholder’s information, but does not include the consolidated financial statements, standalone financial statements and our auditor’s report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements, or our knowledge obtained 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.
Management’s Responsibility for the Standalone Financial Statements
The Company’s Management and the Board of Directors are 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 standalone financial position, the standalone financial performance including the other comprehensive income / (losses), standalone cash flows and standalone changes in equity of the Company in accordance with the accounting principle generally accepted in India, including the Indian Accounting Standards (Ind AS) as specified under Section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentations 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, the Company’s Management and the Board of Directors are 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 Company’s management and Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Company’s Board of Directors are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of 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 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 controls.
• 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 with reference to standalone 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 the Company’s Management and Board of Directors.
• 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 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 users 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 of India in terms of sub-section (11) of Section 143 of the Act, we give in the Annexure “A”, a statement on the matters specified in paragraph 3 and paragraph 4 of the said Order.
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 it appears from our examination of those books.
c. The Standalone Balance Sheet, the Standalone Statement of Profit and Loss including the Other Comprehensive Income / (Losses), the Standalone Statement of Cash Flows and the Standalone Statement of Changes in Equity dealt with this Reports are in agreement with the relevant books of account.
d. In our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards as specified under section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, time to time.
e. On the basis of the written representation received from the directors as on March 31, 2024, taken on the record by the Board of Directors, none of directors is disqualified as on March 31, 2024, from being appointed as a director in term of Section 164(2) of the Act.
f. With respect to adequacy of the internal financial controls with reference to these standalone financial statements of the Company and the operating effectiveness of such control, refer to our separate report in Annexure “B”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls with reference to standalone financial statements.
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, time to time, in our opinion and to the best of our information and explanations given to us, the remuneration paid / provided by the Company to its directors during the reporting period is in accordance with the provision of section 197 of the Act. The remuneration paid to any directors is not in excess of the limit laid down under section 197 of the Act. The Ministry of Corporate Affairs (“MCA”) has not prescribed other details under section 197(16) of the Act which are required to be commented upon by us.
h. With respect to the other matters to be included in the Independent Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, time to time, 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. 47” of the standalone financial statements.
(ii) The Company has made the necessary provisions, as required under the applicable law or the Indian Accounting Standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts.
(iii) There has been no delay in transferring the 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 fund or share premium or any other sources or kind of funds) by the Company to or in any other person or entities, including the foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediaries 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 to or 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 entities, including foreign entities (“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 such 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) As stated in “Note No. 50” to the standalone financial statements:
a) The final dividend proposed in the previous year, declared and paid by the Company during the reporting period is in accordance with section 123 of the Act, as applicable.
b) During the reporting period and until the date of this report, the Company has not declared or paid any interim dividend in accordance with section 123 of the Act, as applicable.
c) The Board of Directors of the Company has proposed the final dividend for the period, which is subject
to the approval of the shareholders at their ensuing Annual General Meeting (AGM). The amount of dividend proposed is in accordance with section 123 of the Act, as applicable.
(vi) Based on our examination, which included test check, the Company has used accounting software for maintaining its books of accounts for the financial period ended March 31, 2024, which has a feature of recording audit trail (edit log) facilities and the same has operated throughout the period for all the relevant transactions recorded in the software. Further, during the course of our audit, we did not come across any instance of the audit trail feature being tampered with.
As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from April 01, 2023, reporting under Rule 11(g) of the Companies (Audit and Auditors) Rule, 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the financial period ended March 31, 2024.
For MANISH N JAIN & CO.
Chartered Accountants FRN No. 0138430W
Place: Nagpur ARPIT AGRAWAL
Dated: May 24, 2024 Partner
UDIN No.: 24175398BKAQOC8250 Membership No. 175398
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