Sterlite Technologies Limited
Report on the Audit of the Standalone Financial Statements
Opinion
1. We have audited the accompanying standalone financial statements of Sterlite Technologies Limited ("the Company”), which comprise
the Standalone Balance Sheet as at March 31, 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 material accounting policy information and other explanatory information.
2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ("the Act”) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024, and total comprehensive loss (comprising of loss and other comprehensive income), changes in equity and its cash flows for the year then ended.
Basis for Opinion
3. We conducted our audit 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 "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 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 thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
4. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the standalone financial statements of the current year. 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.
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Key audit matter
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How our audit addressed the key audit matter
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a. Recognition of revenue:
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We performed the following procedures:
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(Refer note 2.2(a) and note 3 and note 25 to the Standalone Financial Statements)
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The Company recognises revenue in accordance
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Understood and evaluated the design and tested the
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with Ind AS 115 "Revenue from Contracts
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operating effectiveness of key controls relating to
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with Customers”. This involves application of
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revenue recognition.
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significant judgements by Management with
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In respect of a sample of contracts, our procedures
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respect to.
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included, among other things:
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• Combination of contracts entered into with the same customer;
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• Reading of selected contracts to identify
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significant terms of the contracts;
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• Identification of distinct performance obligations;
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• Assessing appropriateness of management's significant judgements in accounting for
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• Total consideration when the contract
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identified contracts such as identification
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involves variable consideration;
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of performance obligation and allocation
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• Allocation of consideration to identified performance obligations; and
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of consideration to identified performance obligation;
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• Recognition of revenue over a period of time or at a point in time, based on timing
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• Evaluating the contract terms with respect to assessment of the date of transfer of control;
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when control is transferred to customer.
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• Testing of timing of recognition of revenue
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(including procedures related to cut off) in line with the terms of contracts;
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Key audit matter
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How our audit addressed the key audit matter
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Further, for contracts where revenue is
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• Testing the appropriateness of key assumptions
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recognised over a period of time, the Company
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used by the Management in making estimates
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makes estimates which impact the revenue
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for contracts where revenue is recognised
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recognition. Such estimates include, but are not
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over time including the appropriateness and
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limited to:
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reasonability of Management's conclusion
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• costs to complete,
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regarding the expected delays in estimated completion of the performance obligations and
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• contract risks, and
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possible impact on key estimates.
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• variable consideration like liquidated
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• Reading of the related contract terms and
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damages and disputes related to
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communications with the customers to assess
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performance and contractual terms
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the likelihood of availability of contractual
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Further for ongoing contracts, management re-
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remedies.
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assesses the above estimates at each reporting
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• Inquiring with the inhouse legal counsel
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date taking into account expected delays in
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regarding disputes related to performance and
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completion of the performance obligations, cost
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contractual terms, status of the disputes and
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escalations and available contractual remedies.
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reviewing and discussing the legal opinions
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In case of disputes, the Company considers interpretation of contractual terms, project status, possibility of settlement, counter-claims, latest discussions / correspondence and legal opinions, wherever applicable.
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obtained by the management from the external legal counsels, wherever necessary.
• Testing of journal entries for unusual/ irregular revenue transactions, if any; and
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We focused on this area since it requires management to exercise judgement and therefore could be subject to material
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• Assessing adequacy of presentation and disclosures in the standalone financial statements.
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misstatement due to fraud or error.
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Based on the above procedures, we did not note any significant exceptions in the estimates and judgements applied by the Management in revenue recognition including those relating to presentation and disclosures as required by Ind AS 115.
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b. Valuation of contract assets and trade
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Our audit procedures included:
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receivables - risk of credit losses
(Refer note 2.2(g)(iii), note 3, note 7 and note 10 to the Standalone Financial Statements)
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The Company's trade receivables and contract
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• Understanding and evaluating the accounting
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assets amount to ' 1,807 crores and ' 1,199 crores
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policy of the Group.
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as at March 31, 2024. The Company measures the expected credit loss provision in respect of these balance using the simplified approach as prescribed by Ind AS 109: Financial Instruments.
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• Evaluating the design and testing the
operating effectiveness of the key controls on measurement of expected credit loss.
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A significant portion of these balances are related to the Global Services Business (GSB) wherein revenue is recognised over time. The credit risk of the customers in GSB is assessed individually by the Company for each customer including assessment of whether overall project status, past history, latest discussion/
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• Understanding the reasons for aged / overdue balances including factors like project status and contractual terms through discussions with the management, corroborating by review of correspondences with the customers and site visits as necessary and obtaining management representations where necessary.
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correspondence with the customers, disputes
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• Assessing and challenging the appropriateness
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and legal opinions are indicative of credit risk.
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and completeness of the assumptions used by the Management in determining the expected credit loss by considering credit risk of the customer, cash collection, correspondences with the customers, etc.
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Key audit matter
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How our audit addressed the key audit matter
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The other trade receivables and contract assets
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• Inquiring with the inhouse legal counsel
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are mainly related to contracts for sale of goods
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regarding disputes, status of the disputed dues
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for which a provision matrix is used to measure
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and reviewing and discussing the legal opinions
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the lifetime expected credit losses as per the
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obtained by the management with the external
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practical expedient prescribed under Ind AS 109.
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legal counsels wherever necessary.
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The trade receivables and contract assets are
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• Assessing and testing the appropriateness of
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material to the standalone financial statements
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inputs and assumptions used in the provision
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and as the assessment of their recoverability
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matrix.
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requires considerable management judgement, we determined this to be a key audit matter.
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• Assessing adequacy of the disclosures in the financial statements required to be made by
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the Management as per the applicable Ind AS requirements.
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Based on the above procedures performed, no significant observations were noted in management's assessment of valuation of trade receivables and contract assets.
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c. Impairment assessment of
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Our audit procedures included:
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- carrying value of investment in STL
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• Understanding and evaluating the design
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UK Holdco Limited
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and testing of operating effectiveness of key
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- loans given to STL UK Holdco Limited and Sterlite Technologies UK Ventures
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controls around management's assessment of impairment;
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Limited; and
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• Evaluating the information based on which the
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- financial guarantee given to the bank for loan taken by STL UK Holdco Limited
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impairment indicators are identified such as financial conditions, orders in hand and market conditions in which these entities operate;
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(Refer note 2.2(f), note 2.2(g)(iii), note 3, note 6 and note 8 to the Standalone Financial Statements)
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• Involving our valuation experts to assist in
assessing the appropriateness of discount rate and terminal growth rate;
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The carrying amount of investments in equity shares of STL UK Holdco Limited as of March 31, 2024 was ' 26 crores. The carrying amount of loans given to STL UK
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• Evaluating the cash flow forecasts by
comparing them to budgets, past results and our understanding of internal and external factors;
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Holdco Limited and Sterlite Technologies
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• Testing the mathematical accuracy of the
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UK Ventures Limited (STUKVL) as of March
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underlying calculations;
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31, 2024 was ' 25 crores and ' 233 crores respectively. The carrying amount of fair value of financial guarantee as of March 31, 2024 was ' 2 crores.
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• Assessing the Company's sensitivity analysis and evaluating whether any reasonably foreseeable change in assumptions could lead to impairment;
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The Company accounts for investments in subsidiaries at cost (less accumulated impairment, if any). The management reviews the carrying value of these
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• Evaluating management's assessment of credit
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risk and appropriateness of information used in the estimation of expected credit loss; and
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investments in subsidiaries at each
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• Assessing the adequacy of disclosures in the
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reporting date and assesses if there are any indicators of impairment and performs an impairment analysis by making an estimate of recoverable amount, being the higher of fair value less costs to sell and value in use. The Management has estimated the recoverable value based on the value in use approach determined using discounted forecast cash flow model.
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financial statements.
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Key audit matter
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How our audit addressed the key audit matter
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For recognition of impairment loss on loans given and financial guarantee, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used.
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Based on the above procedures, we did not note any significant exceptions in the estimates and the judgement applied by the Management in the impairment assessments including those relating to presentation and disclosures in the financial statements.
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The loans given to STL UK Holdco Limited and Sterlite Technologies UK Ventures Limited carry interest and are repayable on demand.
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The discounted forecast cash flow model involves judgements with certain key inputs like:
• Future cashflows,
• Discount rates,
• Terminal growth rate,
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• Economic and entity specific factors incorporated in the valuation.
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We focused on these area due to the significant management judgement and estimates involved in making an estimate of the recoverable amount.
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Other Information
5. The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the standalone financial statements and our auditors' report thereon. The annual report is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other information and we 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 Annual report, 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 action as applicable under the relevant laws and regulations.
Responsibilities of management and those charged with governance for the standalone financial statements
6. 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, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the 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 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.
7. 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. Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditors’ responsibilities for the audit of the
standalone financial statements
8. 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.
9. As part of an audit in accordance with SAs, we exercise professional judgement 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 control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under Section 143(3)
(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to 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 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 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.
10. 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.
11. 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.
12. 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 year 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
13. As required by the Companies (Auditor's Report) Order, 2020 ("the Order”), issued by the Central Government of India in terms of subsection (11) of Section 143 of the Act, we give
in the Annexure B a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
14. 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, except that the backup of certain books of account and other books and papers maintained in electronic mode has not been maintained on a daily basis on servers physically located in India during the year and the matters stated in paragraph 14(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended) ("the Rules”).
(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 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 Accounting Standards specified under Section 133 of the Act.
(e) On the basis of the written representations received from the directors as on March 31, 2024, taken on record by the Board
of Directors, none of the directors is 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 maintenance of accounts and other matters connected therewith, reference is made to our remarks in paragraph 14(b) above on reporting under Section 143(3)(b) and paragraph 14(h)(vi) below on reporting under Rule 11(g) of the Rules.
(g) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A”.
(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 financial statements - Refer Note 21 and 37 to the standalone financial statements;
ii. The Company was not required to recognise a provision as at March 31, 2024 under the applicable law or accounting standards, as it does not have any material foreseeable losses on long-term contracts. The Company did not have any long-term derivative contracts as at March 31, 2024.
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year.
iv. (a) The management has
represented that, to the best of its knowledge and belief, other than as disclosed in Note 8 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, 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, as disclosed in the Note 18 to the standalone financial statements, 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, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
(c) Based on such audit procedures that we considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under subclause (a) and (b) contain any material misstatement.
v. The dividend declared and paid during the year by the Company is in compliance with Section 123 of the Act.
vi. Based on our examination, which included test checks, the Company has used one accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and that has
operated throughout the year for all transactions, except that the audit trail is not maintained for certain type of transactions and changes made by certain users with specific access and for direct data changes at the database level. Further, during the course of performing our procedures, we did not notice any instance of the audit trail feature being tampered with in the accounting software. With respect to other accounting software used by the Company, the audit trail feature was not available for the entire year and accordingly, the question of our commenting on whether the audit trail operated throughout the year for all transactions or whether there was any instance of the audit trail feature been tampered with, does not arise. With respect to another accounting software, the service organisation report produced to us for our examination does not cover the audit trail feature in the accounting software in line with the requirements of the Act and accordingly, we are unable to comment whether the audit trail feature of the aforesaid software was enabled and operated throughout the year for all relevant transactions recorded in the software or whether there was any instance of the audit trail feature been tampered with.
15. The Company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act except for managerial remuneration aggregating to ' 14 crores. As informed to us by the Board of Directors, the Company will seek necessary approval in the ensuing Annual General Meeting.
For Price Waterhouse Chartered Accountants LLP
Firm Registration Number: 012754N/N500016
Neeraj Sharma
Partner
Membership Number: 108391
UDIN: 24108391BKCZBG5662
Place: Pune
Date: May 08, 2024
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