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 Balance Sheet as at March 31, 2023, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and notes to the standalone financial statements, including a summary of significant accounting policies 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, 2023, and total comprehensive income (comprising of profit and other comprehensive loss), changes in equity and 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 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.
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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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Our audit procedures included:
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(Refer note 2.1(b) note 3 and note 25 to the Standalone Financial Statements)
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The Company recognises revenue in accordance with
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Understood and evaluated the design and tested the operating
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Ind AS 115 “Revenue from Contracts with Customers”.
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effectiveness of key controls relating to revenue recognition.
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This involves application of significant judgements by the
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In respect of a sample of contracts, our procedures included,
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Management with respect to:
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among other things:
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• Combination of contracts entered into with the same
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• Reading of selected contracts to identify significant terms of
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customer;
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the contracts;
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• Identification of distinct performance obligations;
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• Assessing appropriateness of management’s significant
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• Total consideration when the contract involves variable
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judgements in accounting for identified contracts such as
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consideration;
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identification of performance obligation and allocation of
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• Allocation of consideration to identified performance
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consideration to identified performance obligation;
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obligations; and
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• Evaluation of the contract terms with respect to assessment
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• Recognition of revenue over a period of time or
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of the date of transfer of control;
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at a point in time, based on timing when control is
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• Testing of timing of recognition of revenue (including
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transferred to customer.
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procedures related to cut off) in line with the terms of contracts;
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Further, for contracts where revenue is recognised over a
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• Testing the appropriateness of key assumptions used by the
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period of time, the company makes estimates which impact the revenue recognition. Such estimates include, but are not limited to:
• costs to complete,
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Management in making estimates for contracts where revenue is recognised over time including the appropriateness and reasonability of Management’s conclusion regarding the expected delays in estimated completion of the performance obligations and possible impact on key estimates;
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• contract risks, and
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• Reading of the related contract terms and communications
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• liquidated damages
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with the customers to assess the likelihood of availability of
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Further for ongoing contracts, management re-assesses
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contractual remedies.
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the above estimates at each reporting date taking into
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• Testing of journal entries for unusual/ irregular revenue
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account expected delays in completion of the performance obligations, cost escalations and available contract
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transactions, if any; and
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remedies.
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• Assessing adequacy of presentation and disclosures in the
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consolidated financial statements.
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We focused on this area because a significant portion of the revenue generated requires management to exercise
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Based on the above procedures, we did not note any significant
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judgement and therefore could be subject to material
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exceptions in the estimates and judgements applied by the
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misstatement due to fraud or error.
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Management in revenue recognition including those relating to presentation and disclosures as required by Ind AS 115.
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Key audit matter 1
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How our audit addressed the key audit matter
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b. Valuation of contract assets and trade receivables - Our audit procedures included:
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risk of credit losses
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Ý Understanding and evaluating the accounting policy of the
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(Refer note 2.1 (n)(iii), note 3, note 7 and note 10 to the
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Company;
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Standalone Financial Statements)
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Ý Evaluating the design and testing the operating
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The Company’s trade receivables and contract assets amount
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effectiveness of the key controls on measurement of
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to ?2,154 crores and ?1,373 crores as at March 31, 2023.
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expected credit loss;
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A significant portion of contract assets and trade receivables •
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Ý Understanding the reasons for aged / overdue balances
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are related to the Global Services Business (GSB). GSB is
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including factors like project status and contractual terms
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into the business of fibre roll out and end to end system
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through discussions with the management, corroborating
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integration wherein revenue is recognised over time.
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by review of correspondences with the customers and
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Such contracts are long term in nature and have inherent
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site visits as necessary and obtaining management
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operational and contractual risks, like difference in billing
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representations where necessary;
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and payment milestones, customer site acceptance, •
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Assessing and challenging the appropriateness
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retention clauses, availability of funds with customers,
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and completeness of the assumptions used by the
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potential disputes, etc., resulting in delays in billing and
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Management in determining the expected credit loss by
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collection and risk of recoverability.
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considering credit risk of the customer, cash collection,
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The trade receivables and contract assets for other
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correspondences with the customers, etc.;
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businesses are mainly related to contracts for sale of goods •
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Inquiring with the inhouse legal counsel regarding status of
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and time and material contracts.
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the disputed dues and reviewing and discussing the legal
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The expected credit loss provision is measured by the
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opinions obtained by the management with the external
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management using the simplified approach as prescribed by
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legal counsels wherever necessary;
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Ind AS 109: Financial Instruments. •
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Ý Assessing and testing the appropriateness of inputs and
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While the Company assesses the recoverability of
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assumptions used in the provision matrix; and
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receivable from each contract of GSB separately based on •
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Ý Assessing adequacy of the disclosures in the financial
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credit risk, project status, past history, latest discussion/
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statements required to be made by the Management as
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correspondence with the customers and legal opinions
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per the applicable Ind AS requirements;
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wherever applicable, the provision is estimated on an |
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Based on the above procedures performed, no significant
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aggregate basis.
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observations were noted in management’s assessment of
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For other businesses, a provision matrix is used to measure valuation of trade receivables and contract assets.
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the lifetime expected credit losses as per the practical
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expedient prescribed under Ind AS 109.
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The trade receivables and contract assets are material to
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the standalone financial statements and as the assessment
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of their recoverability requires considerable management
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judgement, we determined this to be a key audit matter.
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c. Carrying value of investments in subsidiaries Our audit procedures included:
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(Refer note 2.1 (j), note 3, note 6 and note 8 to the •
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Ý Understanding and evaluating the design and testing
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Standalone Financial Statements)
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of operating effectiveness of key controls around
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The carrying amount of loans to and investments in
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management’s assessment of impairment and estimation
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subsidiaries as of March 31, 2023 was ?437 crores and
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of recoverable amount of value of investments;
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?387 crores respectively. •
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Ý Evaluating the information based on which the impairment
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The Company accounts for investments in subsidiaries at cost
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indicators are identified such as financial conditions, order
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(less accumulated impairment if any).
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in hands, market condition in which these entities operate;
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The management reviews the carrying value of these '
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Ý Involving our valuation experts to assist in assessing the
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investments at each reporting date and assesses if there are
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appropriateness of valuation model, discount rate and
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any indicators that the investment in subsidiaries are impaired
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terminal growth rate;
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and, performs an impairment analysis on these investments by '
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Ý Evaluating the cash flow forecasts by comparing them
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making an estimate of recoverable amount, being the higher of
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to budgets, actual past results and our understanding of
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fair value less costs to sell and value in use.
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internal and external factors;
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Ý Testing the mathematical accuracy of the underlying
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calculations;
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Ý Testing the completeness and accuracy of the underlying
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data used in the assessment;
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Key audit matter
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How our audit addressed the key audit matter
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The Management has estimated the recoverable value based on the value in use approach determined using discounted forecast cash flow model requiring judgements with certain key inputs like:
• Future cashflows,
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• Performing sensitivity analysis and evaluating whether any reasonably foreseeable change in assumptions could lead to impairment; and
• Assessing the adequacy of disclosures in the financial statements.
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• Discount rates,
• Terminal growth rate,
• Economic and entity specific factors incorporated in the valuation.
The Company recognised a total impairment of ?4 crores for the year ended March 31, 2023 (for the year ended March 31, 2022 - ?22 crores) against these investments.
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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 impairment assessment of investments in subsidiaries including those relating to presentation and disclosures as required by Ind AS 36.
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We focused on this area due to significant carrying amount of the net investments in subsidiaries and 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 Directors’ Report, but does not include the standalone financial statements and our auditors’ 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 in the 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
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.
Auditor’s 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 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
13. 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 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 in respect of certain books and papers backup is not maintained in India
(c) The Balance Sheet, the Statement of Profit and Loss (including other comprehensive loss), the Statement of Changes in Equity and the 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, 2023 taken
on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023 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.
(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 Auditor’s 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 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, 2023 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, 2023.
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 the notes to the accounts, 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 (Refer note 8 to the standalone financial statements);
(b) The management has represented that, to the best of its knowledge and belief, as disclosed in the notes 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, 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 (Refer note 18 to the standalone financial statements); 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 sub-clause (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. As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 (as amended), which provides for books of account to have the feature of audit trail, edit log and related matters in the accounting software used by the Company, is applicable to the Company only with effect from financial year beginning April 1, 2023, the reporting under clause (g) of Rule 11 of the Companies (Audit and Auditors) Rules, 2014 (as amended), is currently not applicable.
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.
For Price Waterhouse Chartered Accountants LLP Firm Registration Number:012754N/N500016
Neeraj Sharma
Partner
Membership Number: 108391 UDIN: 23108391BGTBUQ1530
Place: Mumbai Date: May 17, 2023
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