1. We have audited the accompanying Financial Statements of Sri Ramakrishna Mills (Coimbatore) Limited (“the Company”), which comprise the Balance Sheet as at 31 March 2024, the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity and Statement of Cash Flows for the year ended on that date and notes to the Financial Statements, including a summary of the material accounting policies and other explanatory information (hereinafter referred to as “the Financial Statements”).
2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid 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 31 March 2024, its profit and other comprehensive income/ loss, changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
3. We conducted our audit of the Financial Statements in accordance with the Standards on Auditing (“SAs”) specified under Section 143(10) of the Act. Our responsibilities under those SAs are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (“ICAI”) together with the ethical requirements that are relevant to our audit of the 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 Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our opinion on the Financial Statements..
Key Audit Matters
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the financial year ended March 31,2024. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.
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Key Audit Matters
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How our audit addressed the key audit matter
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4.1 Going Concern assumption
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The Textile segment has been incurring losses for the last several years and appears to be functioning below rated capacities inspite of modernisation of machineries in certain departments. The Borrowing mix for funding and availability of long term funds from this segment also may have significant impact on the assets and liabilities and consequential impact on Going concern.
Considering the existence of material uncertainty and volatility in the textile segment of the Company which could cast doubt on the profitability and also considering the fact that the assets and liabilities of textile segment have significant impact on the overall business of the company and affect the going concern principles, this has been considered as a key audit matter.
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We have evaluated the management’s assessment of the Company’s ability to continue as a Going Concern, which included Financial, Operational and other events/ conditions. Our Evaluation of the assessment of Going Concern assumption included the following:
• Evaluation of the process, the management followed to make its assessment.
• Assumptions on which the assessment is based and management’s plans for future action and alternate business plans available to the management.
• Feasibility of management’s plans in the circumstances.
• Medium and long-term financing ability of the Company and management/ group’s ability to fund and meet the company’s obligations under support arrangement.
• Past practices followed, strategies and alternate usage of assets of the company by the management, and Cash flow forecasts prepared by the management.
• Inquiries with the management of events or conditions beyond management’s assessment
• Reviewed subsequent events and facts that become known to us occurring between the date of the financial statements and the date of auditor’s report.
Based on the above assessment we have obtained sufficient appropriate audit evidence about the appropriateness of the management’s use of Going Concern assumption and concluded that there is no material uncertainty about the Company’s ability to continue as Going concern.
Further we have also evaluated the management’s estimate of the recoverable amount of the assets of the textile activity and the management’s conclusion thereon. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. Our Opinion is not modified in respect of this matter.
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4.2 Disputed tax & other liabilities (Refer to the note No:3(P) & 42 to the
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financial statements)
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The Company is required to discharge direct and indirect tax obligations under various legislations, as may be applicable.
The tax authorities have raised certain tax demands on the Company in respect of the past periods. The Company has disputed such demands and has appealed against them at appropriate forums. As at March 31, 2024 the Company has an amount of Rs. 61.66 lakhs (Previous year: Rs. 89.05 Lakhs) pertaining to various pending tax litigations.
Ind AS 37 requires the Company to perform an assessment of the probability of economic outflow on account of such disputed tax matters and determine whether any particular obligation needs to be recorded as a provision in the books of account or to be disclosed as a contingent liability. Considering the significant degree of judgement applied by the management in making such assessments and the resultant impact on the financial statements, we have considered it to be a key audit matter..
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In assessing the exposure of the Company for the tax litigations, we have performed
the following procedures:
• Obtained an understanding of the process laid down by the management for performing their assessment taking into consideration past legal precedents, changes in laws and regulations, updates obtained from external tax / legal experts (as applicable)
• Assessed the processes and entity level controls established by the Company to ensure completeness of information with respect to tax litigations;
• Reading communications with relevant tax authorities including notices, demands, orders, etc., relevant to the pending litigations, as made available to us by the management;
• Testing the accuracy of disputed amounts from the underlying communications received from tax authorities and responses filed by the Company;
• Considered the submissions made to appellate authorities and updates obtained by the Company from external tax / legal experts (wherever applicable) which form the basis for management’s assessment;
• Assessed the positions taken by the management in the light of the aforesaid information and based on the examination of the matters by our tax experts
• The grounds of dispute taken by Management were considered along with Legal and Factual matters to enable us to take a judgement. These matters continue to remain in the same status as in the previous year.
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4.3 Revenue Recognition (Refer note No: 2A & 3(c) to the financial statements)
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The company engages in contracts with customers where the revenue is recognised in accordance with Ind AS 115 ‘Revenue from contracts with customers.’
Ind AS 115 ‘Revenue from contracts with customers’ involves making critical judgements in identifying the contract with the customer, identifying the separate performance obligations in the contract, determining the transaction price, allocating the transaction price to the separate performance obligations and recognizing revenue over the period of time / at a point in time depending upon how the entity satisfies its performance obligations.
Considering the significant degree of judgement applied by the management in making such estimates and the resultant impact on the financial statements, we have considered it to be a key audit matter
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Our audit procedures include the following:
• Evaluated the design and implementation of controls for assessing compliance with relevant standards.
• Evaluated the appropriateness of the Company’s revenue recognition accounting policies and assessing compliance with the policies in terms of the applicable standards.
• Evaluated the technical estimates made by the management including the percentage of completion furnished and also evaluated the management’s judgement of transfer of control over the assets to the extent of performance obligation executed.
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Information Other than the Financial Statements and Auditor’s Report Thereon
5. The Company’s management and Board of Directors is responsible for the preparation of the other information. The other information comprises the information (included in the Management Discussion and Analysis) in the Board’s Report including Annexures to Board’s Report (Business Responsibility Report, Corporate Governance) and Shareholder’s Information, but does not include the Financial Statements and our auditor’s report thereon.
6. The other information is expected to be made available to us after the date of this auditor’s report. Our opinion on the Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon.
7. In connection with our audit of the 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 Financial Statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
8. 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 necessary actions, as applicable under the relevant laws and regulations.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
9. The Company’s management and Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards (“Ind AS”) specified under Section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015 as amended.
10. 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 of the appropriate accounting software for ensuring compliance with applicable laws and regulations including those related to retention of audit logs; 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 Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
11. In preparing the Financial Statements, the Management and 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 Management and Board of Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
12. The Board of Directors are also responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
13. Our objectives are to obtain reasonable assurance about whether the 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 Standards of Auditing (“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 Financial Statements.
14. 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 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 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 and Board of Directors.
• Conclude on the appropriateness of Management’s and Board of Directors’ use of the going concern basis of accounting in preparation of Financial Statements 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 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 Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
15. 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
16. 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.
17. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current year 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
18. As required by the Companies (Auditor’s Report) Order, 2020 (“the Order”) issued by the Central Government of India in terms of Section 143(11) of the Act, we give in the “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
19. (A) 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 in electronic mode on servers physically located in India, so far as it appears from our examination of those books except for the matters stated in paragraph 19 B (f) below (on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014). The Management has represented to us that the process of taking daily backups is in place, however, we are unable to comment on the same due to absence of backup logs. Refer Note 56 to the Financial Statements
c) The balance sheet, the statement of profit and loss (including other comprehensive income) 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 Financial Statements comply with the Accounting Standards specified under Section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015, as amended.
e) On the basis of the written representations received from the directors as on 31 March 2024, taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 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 reservation in paragraph 19(A)(b) above (on reporting under section 143(3)(b) of the Act) and paragraph 19(B)(f) below (on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended)).
g) With respect to the adequacy of the internal financial controls with reference to Financial Statements of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure B” to this report.
(B) 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:
a) The Company has disclosed the impact of pending litigations as at 31 March 2024 on its financial position in its Financial Statements - Refer Note 42 to the financial statements.
b) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
c) On the basis of the declarations made to us by the management, which is relied upon by us, we report that there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
d) (i) The Management has represented that, to the best of their knowledge and belief, as disclosed in Note No: 53 (i) to the financial statements, no funds have been
advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever (“Ultimate Beneficiaries”) by or on behalf of the Company or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(ii) The Management has also represented that, to the best of their knowledge and belief, as disclosed in Note No: 53 (i), to the 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, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever (“Ultimate Beneficiaries”) by or on behalf of the Funding Parties or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(iii) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, performed by us, nothing has come to our notice that has caused us to believe that the representations under paragraphs 19 (B) (d) (i) and 19 (B) (d) (ii) contain any material misstatement.
e) The company has not declared or paid any dividend during the year. Hence reporting in respect of compliance with section 123 of the Companies Act, is not applicable.
f) Based on our examination which included test checks, the Company has used an accounting software for maintaining its books of account, however, the feature of recording audit trail (edit log) facility has not been enabled. Consequently, we are unable to comment on audit trail feature of the said software. (Refer Note:56 of the Financial Statements).
(C) With respect to the matter to be included in the Auditor’s Report under Section 197(16) of the Act:
In our opinion and according to the information and explanations given to us, the remuneration paid/provided by the Company to its directors during the current year is
in accordance with the provisions of Section 197 of the Act. The remuneration paid/provided to directors is within the limits laiddown under Section 197 of the Act.
For CSK PRABHU & CO Chartered Accountants Firm Regd No: 002485S MAHESH PRABHU
Place: Coimbatore Partner
Date : 29-05-2024 Membership number: 214194
UDIN: 24214194BKBGAB6954
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