GANESH HOUSING CORPORATION LIMITED,REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTSOpinion
We have audited the accompanying standalone financial statements of GANESH HOUSING CORPORATION LIMITED ("the company"), which comprise the Balance Sheet as at 31st March, 2022, the Statement of Profit and Loss (including other Comprehensive Income), the Cash Flow Statement and the statement of changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information (hereinafter referred to as "Standalone financial statement").
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, 2022, and its profit (including other comprehensive income), changes in equity and its cash flows for the year ended on that date.
Basis for opinion
We conducted our audit 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 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 there under, 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 on the Standalone Financial Statements.
Key audit matters
Key audit matters ('KAM') 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 matter described below to be the key audit matters to be communicated in our report.
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The key audit matters
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How our audit addressed the key audit matter
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Investment in subsidiaries - refer note 3 to the standalone financial statements
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Assessment of impairment of investment in subsidiaries:
The carrying amount of the investments in subsidiaries held at cost less impairment represents 20.68% of the Company's total assets respectively.
The Company has investments in subsidiaries. These investments are carried at cost less any diminution in value of such investments. The investments are analyzed for impairment at each reporting date by comparing the carrying value of investments in the Company's books with the net assets of the relevant subsidiaries' balance sheet. Further, the Company assesses the projected cash flows of the real estate projects in these underlying entities. This involve significant estimates and judgment, due to the inherent uncertainty involved in forecasting future cash flows. There is significant judgment in estimating the timing of the cash flows and the relevant discount rate.
The company has three subsidiaries. One subsidiary is form during F.Y. 2021-2022 and has a negligible loss. However, accumulated loss of Madhukamal Infrastructure Private Limited is ' 8474.52 lakh. Considering the impairment assessment involves significant assumptions and judgement, this is considered as a key audit matter
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Our audit procedures to assess recoverability included the following:
• Comparing the carrying amount of investments in the Company's books, with the net asset balance in the relevant audited / unaudited balance sheet of subsidiaries. This is to identify if their net assets (being an approximation of their minimum recoverable amount) were in excess of their carrying amount;
• For the investments where the carrying amount exceeded the Company's share in net asset value, we compared the carrying amount of the investment with the projected cash flows and profitability. This is based on approved business plans of the subsidiaries; and
• The loss of Madhukamal Infrastructure Private Limited has reduced from ' 15556.65 lakh to ' 8474.52 lakh during the year.
• Considering the adequacy of disclosures in respect of the investment in subsidiaries.
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The key audit matters
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How our audit addressed the key audit matter
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Inventories - refer note 8 to the standalone financial statements
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Assessment of net realisable value (NRV) of inventories:
Inventories on construction of residential units comprising ongoing and completed projects, initiated but unlaunched projects and land stock, represents a significant portion of the Company's total assets. The Company recognises profit on the sale of each commercial & residential unit with reference to the overall profit margin depending upon the total cost incurred on the project. A project comprises multiple units, the construction of which is carried out over a number of years. The recognition of profit for sale of a unit, is therefore dependent on the estimate of future selling prices and construction costs. Further, estimation uncertainty and exposure to cyclicality exists within long- term projects.
Forecasts of future sales are dependent on market conditions, which can be difficult to predict and be influenced by political and economic factors.
Considering the significance of the amount of carrying value of inventories and the involvement of significant estimation and judgement in assessment of NRV, this is considered as a key audit matter.
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Our audit procedures to assess the net realisable value (NRV) of
inventories included the following:
• Enquiry with the Company's personnel to understand the basis of computation and justification for the estimated recoverable amounts of the unsold units ("the NRV assessment");
• Assessing the Company's valuation methodology for the key estimates, data inputs and assumptions adopted in the valuation. This involved comparing expected average selling prices with published data such as recently transacted prices for similar properties located in nearby vicinity of each project and the sales budget maintained by the Company;
• While analyzing the expected average selling price, we have performed a sensitivity analysis on the selling price and compared this to the budgeted cost;
• For our samples, obtained the fair valuation reports of such land parcels for assessing the valuation methodology, key estimates and assumptions adopted in the valuation; and
• Verifying the NRV assessment and comparing the estimated construction costs to complete each development with the Company's updated budgets;
• Obtaining a Register Valuer's certificate for a vast track of property becomes an extremely costly proposition for estimating NRV & hence, other methods are used.
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Land advances - refer note 12 to the standalone financial statements
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Assessment of recoverability of land advances Land advance represents a significant portion of the Company's total assets.
Land advance represents the amount paid towards procurement of land parcels to be used in the future for construction of commercial & residential projects. These advances are carried at cost less impairment losses. These land advances will be converted into land parcels as per the terms of the underlying contracts under which these land advances have been given.
The carrying value of advances are tested for recoverability by the Company by comparing the valuation of land parcels in the same area for which land advances have been given.
Considering the quantum of the amount of carrying value of land advances to total assets of the Company and significant estimates and judgements involved in assessing recoverability of land advances, this has been considered as a key audit matter
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Our audit procedures to assess the recoverability of land advances
included the following:
• Enquiry with the Company's personnel on the process of providing land advances and test of key controls over such land advances paid during the year;
• Enquiry with the Company's personnel also covered obtaining reasons on the long-standing land advances and understanding Company's plan for conversion of the land advances to land stock;
• For our samples, verified the underlying agreements or Memorandum of understanding in possession of the Company, based on which land advances were given, to assess the Company's rights over the land parcels in subject;
• For our samples, obtained the fair valuation reports of such land parcels for assessing the valuation methodology, key estimates and assumptions adopted in the valuation.; and
• For our samples, verified the published guidelines values for the area in which these land parcels are situated
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The key audit matters
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How our audit addressed the key audit matter
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Business Advances to Subsidiaries & other companies (refer to note 12 and 45 to the standalone financial statements)
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Recoverability of business advances to subsidiaries and other companies:
The carrying amount of the business advances & other advances to subsidiaries, group companies & others represents 27.12% of the Company's total assets respectively.
The Company has extended business advances to subsidiaries & group companies that are assessed for recoverability at each period end.
The company has given total loans & advances of ' 30200.10 lakh. Out of this ' 29443.38 lakh are business advances to subsidiaries companies, ' 22.45 lakh to other related parties & ' 146.58 lakh to others. ' 435.51 lakh are business advances for purchase of land on behalf of the company given to related parties & ' 50.00 lakh given to others and ' 102.18 lakh other miscellaneous advances at 31st March 2022.
Due to the nature of the business in the real estate industry, the Company is exposed to risk in respect of the recoverability of the business advances granted to the aforementioned related parties. There is also judgment involved as to the recoverability of the working capital and project specific business advances, which rely on a number of property developments being completed over the time period specified in agreements.
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Recoverability of business advances to subsidiaries and group
companies:
Our audit procedures included:
• We reviewed the controls in place for issuing new business advances and evidenced the Board / CFO approval obtained. We obtained management's assessment of the recoverability of the business advances, which includes cash flow projections over the duration of the business advances. These projections are based on underlying property development appraisals;
• We tested cash receipts received in relation to these business advances during the year through bank statement; and
• We have obtained independent confirmations to ensure completeness and existence on test check basis of business advances held by related parties as on 31st March 2022.
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Evaluation of uncertain tax positions
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The Company is subject to periodic challenges by local tax authorities on a range of tax matters during the normal course of business including direct and indirect tax matters. These involve significant management judgment to determine the possible outcome of the uncertain tax positions, consequently having an impact on related accounting and disclosures in the financial statements.
Refer Note 46 to the financial statements.
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Our audit procedures include the following substantive procedures:
• Obtained understanding of key uncertain tax positions; and
• We along with our internal tax experts -
0 Read and analysed select key correspondences, external legal opinions / consultations by management for key uncertain tax positions;
0 Discussed with appropriate senior management and evaluated management's underlying key assumptions in estimating the tax provisions; and
0 Assessed management's estimate of the possible outcome of the disputed cases.
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Information Other than the Financial Statements and Auditor's Report Thereon
The Company's management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company's annual report, but does not include the consolidated financial statement, 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.
Management's responsibility for the standalone financial statements
The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("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, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act, read with relevant rules issued there under. 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 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.
In preparing the standalone financial statements, 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 management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Board of Directors is also responsible for overseeing the Company's financial reporting process.
Auditor's 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 skepticism 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(3X0 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 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 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.
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 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 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
1. 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 - 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, we report that:
a. We have sought and obtained all the information and explanations which to the best of our knowledge and beliefs were necessary for the purposes of our audit;
b. In our opinion proper books of accounts as required by Law have been kept by the Company so far as it appears from our examinations of those books;
c. The Balance Sheet, Statement of Profit and Loss including Other Comprehensive Income, the Cash Flow
Statement and Statement of Changes in Equity dealt with by this report are in agreement with the relevant books of account;
d. In our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards specified under section 133 of the Act, read with relevant rules issued there under;
e. On the basis of written representations received from the directors and on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2022 from being appointed as a director in terms of Section 164(2) of the Act.
f. 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.
g. With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act, as amended, In 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.
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 as at 31st March, 2022 on its financial position in its standalone financial statements as referred to in Note No. 46 [A to H] to the standalone financial statements.
ii. The company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.
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 ended 31st March, 2022.
iv. (a) The Management has represented that,
to the best of its knowledge and belief, no
funds, except note no. 51, (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, 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, and based on the test checks carried out by the auditor, nothing has come to our notice that has caused us to believe that the representations under subclause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement. (Refer note no. 51)
v. During the year, the company has not declared or paid any interim or final dividend. Hence, the question of payment of dividend in accordance with section 123 of the Companies Act, 2013 does not arise.
FOR, PURNESH R. MEHTA & CO.
Chartered Accountants FRN:- 142830W
PURNESH MEHTA
Proprietor
Place:- Ahmedabad Membership No.:- 032812
Date :- 12/05/2022 UDIN:- 22032812AIVFEA8441
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