We have audited the accompanying standalone financial
statements of Aarti Industries Limited (the "Company"),
which comprise the Balance Sheet as at March 31,2026, the
Statement of Profit and Loss (including the statement on
Other Comprehensive Income), the Statement of Changes
in Equity and the Statement of Cash Flows for the year
ended on that date and notes to the financial statements
(including summary of the 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 (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 31,2026 and its
profit, and total comprehensive income, changes in equity
and its cash flows for the year ended on that date.
BASIS FOR OPINION
We conducted our audit of the standalone financial
statements in accordance with the Standards on Auditing
("SA"s) 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 ("ICAI") together with the
independence 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 obtained by us 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. We have determined the
matters described below to be the key audit matters to be
communicated in our report.
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Sr.
No.
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Key Audit Matter
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Auditor's Response
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1
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Revenue Recognition (Refer Note 2(I) - Material accounting
policies; Note 27 - Revenue from operations)
For the year ended March 31, 2026, the Company
recognised net revenue from operations of ' 8,422.39 Crs
(year ended March 31, 2025: ' 7,302.31 Crs). Revenue is
recognised under Ind AS 115 when control of goods is
transferred to the customer.
We considered revenue recognition to be a key audit matter
having regard to:
(a) the fact that a portion of revenue arises from exports
transacted under a range of Incoterms (such as
FOB, CFR, CIF and DAP), which involve judgement in
determining the point at which control is regarded as
transferred and, accordingly, the period of recognition,
particularly around the reporting date;
(b) the presence of variable consideration (including
discounts, rebates, credit notes and rights of return),
the estimation of which involves management
judgement;
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Our audit procedures included, among others, the following:
• Obtained an understanding of the revenue recognition
process and, on a test basis, evaluated the design and
implementation and tested the operating effectiveness
of selected key controls, including relevant IT controls.
• Considered whether the revenue recognition policies
are in accordance with Ind AS 115.
• For a sample of sales recorded close to the year end,
examined invoices, dispatch records, shipping bills and
bills of lading to evaluate whether revenue appeared to
have been recognised in the appropriate period, having
regard to the applicable Incoterm.
• On a sample basis, traced sales to contracts/purchase
orders, invoices and evidence of dispatch or delivery.
• Evaluated management's estimation of variable
consideration, including by recomputing selected
accruals and comparing them with historical trends
and with credit notes issued after the year end, and
considered the application of the constraint.
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Sr.
No.
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Key Audit Matter
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Auditor's Response
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(c) certain arrangements involving contract modifications
and costs to fulfil contracts, where judgement is
exercised in determining whether such costs are
capitalised or expensed; and
(d) revenue being an area to which, in accordance with SA
240, we directed particular attention.
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• Read a selection of significant contracts to identify
modifications and fulfilment costs and considered
management's judgement on their treatment.
• Performed analytical procedures on disaggregated
revenue and made inquiries regarding significant
variances.
• Tested selected journal entries posted to revenue,
including entries recorded manually and entries
recorded at or near the period end, selected using risk-
based criteria.
• Considered whether the related disclosures were in
accordance with the applicable financial reporting
framework.
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2
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Valuation and existence of inventories (Refer Note 2 (H) -
Material accounting policies; Note 8 - Inventories)
As at March 31, 2026, the Company held inventories of
' 1,297.01 Crs (March 31,2025: ' 1,387.52 Crs), comprising
raw materials, work-in-progress, intermediates, finished
goods, catalysts and goods in transit held across multiple
manufacturing locations. Inventories are measured at the
lower of cost and net realisable value in accordance with
Ind AS 2.
We considered this a key audit matter having regard to:
(a) the volume of inventories held across a number
of locations, and the use of costing systems that
involve certain adjustments that are determined and
processed outside the system;
(b) the estimation of net realisable value, which involves
management judgement, particularly in the context
of price volatility in certain key chemicals and
intermediates;
(c) the carrying value of catalysts, which is dependent on
assumptions regarding recoverability and pattern of
consumption; and
(d) goods in transit at the period end, which give rise to
considerations around cut-off and ownership.
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Our audit procedures included, among others, the following:
• Obtained an understanding of, and on a test basis
evaluated the design and tested the operating
effectiveness of, selected controls over inventory
recording, costing, physical verification and the
assessment of net realisable value.
• Attended physical inventory counts at selected
significant locations, observed the count procedures,
performed test counts on a sample basis and
reconciled the results to the records; for other locations,
considered the results of management's counts and
reconciliations.
• On a sample basis, tested the build-up of inventory
cost (bills of material, overhead absorption, treatment
of variances) and re-performed a selection of the
cost adjustments processed by management outside
the costing system, agreeing inputs to supporting
documentation.
• Evaluated net realisable value by comparing the
carrying cost of a sample of items to selling prices
realised after the year end and to prevailing market
prices and considered the adequacy of write-downs.
• Considered the carrying value of catalysts having regard
to management's assumptions on recoverability and
consumption and sought to corroborate consumption
with available production and technical records.
• On a sample basis, examined documentation
supporting goods in transit and considered cut-off and
ownership at the period end.
• Considered whether the related disclosures were in
accordance with the applicable financial reporting
framework.
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INFORMATION OTHER THAN THE STANDALONE FINANCIAL
STATEMENTS AND AUDITOR'S REPORT THEREON
The Company's Board of Directors are responsible for the
preparation of the other information. The other information
comprises information included in the Management
Discussion and Analysis, Board's Report including annexures
thereto, Business Responsibility and Sustainability Report,
Corporate Governance Report, and Shareholder Information,
but does not include the standalone financial statements
and our auditor's report thereon, which we expect 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 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 on the other
information obtained prior to the date of this auditor's
report, 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.
When we read the additional information mentioned above
that will be included in 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 THE MANAGEMENT AND THOSE
CHARGED WITH GOVERNANCE FOR THE STANDALONE
FINANCIAL STATEMENTS
The Company's 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 financial position,
financial performance, including other comprehensive
income, changes in equity and cash flows of the Company in
accordance with the Ind AS and other accounting principles
generally accepted in India. This responsibility also includes
maintenance of adequate accounting records in accordance
with the provisions of the Act for safeguarding the assets of
the Company and for preventing and detecting frauds and
other irregularities; selection and application of appropriate
accounting policies; making judgements and estimates that
are reasonable and prudent; and design, implementation
and maintenance of adequate internal financial controls,
that were operating effectively for ensuring the accuracy
and completeness of the accounting records, relevant to
the preparation and presentation of the standalone financial
statements that give a true and fair view and are free from
material misstatement, whether due to fraud or error.
In preparing the 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.
The Board of Directors are also responsible for overseeing
the Company's financial reporting process.
AUDITORS' RESPONSIBILITIES FOR THE AUDIT OF THE
STANDALONE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the standalone financial statements as a whole
are free from material misstatement, whether due to fraud
or error, and to issue an auditor's report that includes our
opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance
with SAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these standalone
financial statements.
As part of an audit in accordance with SAs, we exercise
professional judgment and maintain professional
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 financial 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 the management.
• Conclude on the appropriateness of management's use
of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that
may cast significant doubt on the Company's ability
to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw
attention in our auditor's report to the related disclosures
in the 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 user of the standalone Ind
AS financial statements may be influenced. We consider
quantitative materiality and qualitative factors in (i) planning
the scope of our audit work and in evaluating the results
of our work; and (ii) to evaluate the effect of any identified
misstatements in the standalone financial statements.
We communicate with those charged with governance
regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a
statement that we have complied with relevant ethical
requirements regarding independence, and to communicate
with them all relationships and other matters that may
reasonably be thought to bear on our independence, and
where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of
most significance in the audit of the standalone financial
statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor's
report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated
in our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public
interest benefits of such communication.
REPORT ON OTHER LEGAL AND REGULATORY
REQUIREMENTS
1. As required by the Companies (Auditor's Report) Order,
2020 (the "Order") issued by the Central Government
in terms of Section 143(11) of the Act, we give in
"Annexure A" a statement on the matters specified in
paragraphs 3 and 4 of the Order.
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. Insofar as the modification on maintaining
an audit trail in the accounting software is
concerned, refer paragraph (i) (vi) below;
c) The Balance Sheet, the Statement of Profit and
Loss including Other Comprehensive Income,
Statement of Changes in Equity and the Statement
of Cash Flows dealt with by this Report are in
agreement with the books of accounts.
d) In our opinion, the aforesaid financial statements
comply with the Ind AS specified under Section
133 of the Act read with Rule 7 of the Companies
(Accounts) Rules, 2014.
e) On the basis of the written representations
received from the directors taken on record by
the Board of Directors, none of the directors is
disqualified as on 31 March 2026 from being
appointed as a director in terms of Section 164(2)
of the Act.
f) The modification arising from the maintenance
of the audit trail on the accounting software,
comprising the application and database are as
stated in the paragraph (i) (vi) below on reporting
under Rule 11(g);
g) With respect to the adequacy of the internal
financial controls over financial reporting of the
Company and the operating effectiveness of
such controls, refer to our separate Report in
"Annexure B". 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.
h) I n our opinion and to the best of our information
and according to the explanations given to us,
the remuneration paid by the Company to its
directors during the year is in accordance with the
provisions of Section 197 of the Act.
i) 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 standalone financial statements -
Refer note 38 to the standalone financial
statements.
ii. The Company has made provision, as
required under the applicable law and
accounting standards, for material
foreseeable losses, if any, on long-term
contracts including derivative contracts.
iii. There has been no delay in transferring
amounts, required to be transferred, to the
Investor, Education and Protection Fund by
the Company.
iv. (a) The Management has represented
that, to the best of its knowledge and
belief as disclosed in note no 48(v) to
the standalone financial statements,
no funds (which are material either
individually or in the aggregate) have
been advanced or loaned or invested
(either from borrowed funds or share
premium or any other sources or kind
of funds) by the Company to or in
any other person or entity, including
foreign entity ("Intermediaries"), with
the understanding, whether recorded
in writing or otherwise, that the
Intermediary shall, whether, directly
or indirectly lend or invest in other
persons or entities identified in any
manner whatsoever by or on behalf of
the Company ("Ultimate Beneficiaries")
or provide any guarantee, security
or the like on behalf of the Ultimate
Beneficiaries;
(b) The Management has represented,
that, to the best of its knowledge and
belief, as disclosed in note no 48(vi) to
the standalone financial statements,
no funds (which are material either
individually or in the aggregate) have
been received by the Company from
any person or entity, including foreign
entity ("Funding Parties"), with the
understanding, whether recorded in
writing or otherwise, that the Company
shall, whether, directly or indirectly, lend
or invest in other persons or entities
identified in any manner whatsoever
by or on behalf of the Funding Party
("Ultimate Beneficiaries") or provide
any guarantee, security or the like on
behalf of the Ultimate Beneficiaries;
(c) Based on the audit procedures that
have been considered reasonable
and appropriate in the circumstances,
nothing has come to our notice that
has caused us to believe that the
representations under sub-clause (i)
and (ii) of Rule 11(e), as provided under
(a) and (b) above, contain any material
misstatement.
v. As stated in note no 16.7 to the standalone
financial statements
(a) The final dividend proposed in the
previous year, declared and paid by
the Company during the year is in
accordance with Section 123 of the Act.
(b) The Board of Directors of the Company
have proposed a final dividend for the
year which is subject to the approval
of the members at the ensuing Annual
General Meeting. The amount of
dividend proposed is in accordance with
section 123 of the Act, as applicable.
vi. Based on our examination, which included
test checks, the Company has used an
accounting software for maintaining its
books of account for the financial year
ended 31 March 2026, which has a feature
of recording audit trail (edit log) facility, and
the same has operated throughout the year
for all relevant transactions recorded in the
software, including at the database level
following the Company's migration to a
revised version of the software with effect
from 1 April 2025. We did not come across
any instance of the audit trail feature being
tampered with.
The requirement to preserve the audit trail
for record retention applies from the financial
year commencing 1 April 2023. For the period
1 April 2023 to 31 March 2025, as reported
in our audit report for the year ended 31
March 2025, the audit trail did not operate at
the database level for direct changes made
using privileged/super user access; to that
extent, the audit trail for that period was
not generated and has not been preserved
as required. Save as aforesaid, the audit
trail has been preserved by the Company in
accordance with the statutory requirements
for record retention.
For Gokhale & Sathe
Chartered Accountants
FRN:103264W
Uday Girjapure
Partner
Place: Mumbai Membership No. 161776
Date: May 4, 2026 UDIN: 26161776TXJWHG9623
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