Report on the Audit of the Standalone Financial Statements
Opinion
1. We have audited the accompanying standalone financial statements of Sula Vineyards Limited (‘the Company'), which comprise the Balance Sheet as at 31 March 2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including a summary of the 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 Indian Accounting Standards (‘Ind AS') specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2023, and its profit (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing 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 ethical requirements that are relevant to our audit of the 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 financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
5. We have determined the matters described below to be the key audit matter to be communicated in our report.
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Key audit matter
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How our audit addressed the key audit matter
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(a) Assessment of impairment of non-current investment in and non-current loans to subsidiary (Refer
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note 43 of the standalone financial statements)
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The Company, as at 31 March 2023, has non-current
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Our audit procedures relating to impairment
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investment and non-current loans amounting to
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assessment of loans given to and investment in
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INR 274.58 million and INR 298.98 million,
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subsidiary included, but were not limited to, the
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respectively, in Artisan Spirits Private Limited
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following procedures:
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(‘ASPL'/‘subsidiary'), its wholly owned subsidiary. As on such date, ASPL's net-worth has been substantially eroded as a result of accumulated losses. Such conditions have been identified by the management as impairment indicators of the carrying value of the investments as per Ind AS 36, Impairment of Assets (‘Ind AS 36').
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o Obtained an understanding of the management process and evaluating the design and testing operating effectiveness of controls over identification of impairment indicators; o Assessed the professional competence and objectivity of the external valuation expert engaged by the management for performing the
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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 assessed the recoverability
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required valuations to estimate the recoverable
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of the aforesaid amounts by carrying out a
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value of the amounts invested in or recoverable
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valuation of the subsidiary's business with the
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from the subsidiary;
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help of an external valuation expert using the
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o
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Involved auditor's experts to assist to evaluate the
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discounted cashflow method, which requires management to make significant estimates and assumptions related to forecast of future cash flow projections based on business plans including growth rates and selection of the discount rates, to determine the recoverable value to be considered for impairment testing of the carrying value of the aforesaid balances.
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o
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appropriateness of valuation methodology and assumptions such as discount rate used by the management's expert;
Traced the future business projections to approved business plans, and evaluated the appropriateness of the assumptions used in determining key inputs such as revenue growth and operating costs, basis our understanding of the business and market
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Due to the significance of carrying amount of the
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conditions, as relevant;
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investment and loans, significant management judgements and assumptions involved in carrying out the impairment assessment, and the significant auditor attention required to test such management's judgement, this is considered to be a key audit matter in the current year audit.
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o
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Tested the mathematical accuracy of the projections and applied independent sensitivity analysis to certain key assumptions to determine estimation uncertainty involved and impact on conclusions drawn basis headroom available; Evaluated the appropriateness and adequacy of
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o
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The above matter is also considered fundamental
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the disclosures made by the management in the
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to the understanding of the users of the
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financial statements in accordance with applicable
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accompanying standalone financial statements
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accounting standards.
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(b) Revenue Recognition
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Refer note 2(xix) to the accompanying standalone
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Our audit procedures relating to revenue recognition
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financial statements for the accounting policy on
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included, but were not limited to, the following
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revenue recognition and note 22 for the details of
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procedures:
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revenue recognised during the year.
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o
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Understood the process of revenue recognition
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The Company derives its revenue from sale
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and evaluated the appropriateness of the
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of products (alcoholic beverages i.e. wine and
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accounting policy adopted by the management
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spirits) to a wide network of distributors and
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on revenue recognition including determination of
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state government corporations. Further, revenue
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transaction price and satisfaction of performance
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from sale of services represents revenue from
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obligations, in accordance with Ind AS 115;
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hospitality services.
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o
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Evaluated the design and tested the operating
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Revenue recognition for sale of products and
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effectiveness of relevant key controls around
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services in accordance with the principles of Ind
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revenue recognition including controls over
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AS 115, "Revenue from Contracts with Customers" (‘Ind AS 115'), for the Company involves certain key
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pricing, dispatch and general IT environment;
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judgements, such as, identification of performance
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o
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Performed substantive testing, on a sample basis, on
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obligations in a contract, determination of
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revenue transactions recorded during the year, and
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transaction price including variable consideration
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transactions recorded before and after year end, by
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in the form of rebates, discounts and pay-outs to
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inspecting supporting documents such as customer
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distributors under various promotional schemes
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contracts/ purchase orders, invoices, proofs
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Key audit matter
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How our audit addressed the key audit matter
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offered by the Company, and assessment of satisfaction of the performance obligations represented by the transfer of control of the products sold and services rendered to the customers, including state government corporations.
Owing to the significance of amount, multiplicity of Company's products and revenue streams, volume of transactions, size of distribution network, nature of customers with varied terms of contracts, audit of revenue recognized during the year requires significant auditor attention and industry knowledge, and accordingly, revenue recognition is considered as a key audit matter in the current year audit.
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of dispatch and delivery etc., to ensure the accuracy and completeness of revenue recorded for such transactions;
o Performed substantive analytical procedures such as variance analysis on revenue to identify any unusual trends;
o Performed substantive testing by selecting a sample of discount, rebate and other pay-out transactions with distributors recorded during the year as well as period end accrual basis the promotion schemes offered by the Company;
o Evaluated the adequacy of disclosures made in the accompanying standalone financial statements in respect of revenue recognition in accordance with financial reporting framework
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Information other than the Financial Statements and Auditor's Report thereon
6. The Company's Board of Directors are responsible for the other information. The other information comprises the information included in the Board Report, Report on Corporate Governance and Management Discussion and Analysis, but does not include the standalone financial statements and our auditor's report thereon. The Board Report, Report on Corporate Governance and Management Discussion and Analysis are 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 Board Report, Report on Corporate Governance and Management Discussion and Analysis, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
7. The accompanying standalone financial statements have been approved by the Company's Board of Directors. The Company's Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation 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 specified under section 133 of the Act 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 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
8. In preparing the financial statements, the Board of Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
9. 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
10. 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 on Auditing 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.
11. As part of an audit in accordance with Standards on Auditing, specified under section 143(10) of the Act we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
o 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;
o 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;
o Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
o Conclude on the appropriateness of Board of Directors' 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 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;
o 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.
12. 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.
13. 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.
14. 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 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
15. As required by section 197(16) of the Act based on our audit, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.
16. 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 I a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
17. Further to our comments in Annexure I, as required by section 143(3) of the Act based on our audit, we report, to the extent applicable, 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 purpose of our audit of the accompanying standalone financial statements;
b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
c) The standalone financial statements dealt with by this report are in agreement with the books of account;
d) In our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
e) The matter described in paragraph 5(a) under the Key Audit Matter section, in our opinion, may have an adverse effect on the functioning of the Company;
f) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2023 from being appointed as a director in terms of section 164(2) of the Act;
g) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company as on 31 March 2023 and the operating effectiveness of such controls, refer to our separate Report in Annexure II wherein we have expressed an unmodified opinion; and
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, as detailed in note 32(A)(ii), (iii) and 44 to the standalone financial statements, has disclosed the impact of pending litigation on its financial position as at 31 March 2023.
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2023;
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2023;
iv. a. The management has represented
that, to the best of its knowledge and belief, as disclosed in note 49(v) to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any person(s) or entity(ies), including foreign entities (‘the 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 (‘the Ultimate Beneficiaries') or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;
b. The management has represented that, to the best of its knowledge and belief, as disclosed in note 49(vi) to the standalone financial statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (‘the 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 performed as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the management representations under sub-clauses (a) and (b) above contain any material misstatement.
v. The interim/final dividend paid by the Company during the year ended 31 March 2023 in respect of such dividend declared for the previous year is in accordance with section 123 of the Act to the extent it applies to payment of dividend.
Further, as stated in Note 39 to the accompanying standalone financial statements, the Board of Directors of the Company have proposed final dividend for the year ended 31 March 2023 which is subject to the approval of the members at the ensuing Annual General Meeting.
The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.
vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 requires all companies which use accounting software for maintaining their books of account, to use such an accounting software which has a feature of audit trail, with effect from the financial year beginning on 1 April 2023 and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 (as amended) is not applicable for the current financial year.
For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Rakesh R. Agarwal
Partner
Membership No.: 109632
UDIN: 23109632BGXEAA4558
Place: Mumbai
Date: 3 May 2023
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