Prestige Estates Projects Limited
Report on the Audit of the Standalone Financial Statements OPINION
We have audited the accompanying standalone financial statements of Prestige Estates Projects Limited ("the Company”), which comprise the Balance sheet as at March 31, 2023, the Statement of Profit and Loss, including the statement of 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 significant accounting policies and other explanatory information.
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, as amended ("the Act”) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31,2023, its profit including other comprehensive income its cash flows and the changes in equity 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 (SAs), as 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 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 audit opinion on the standalone financial statements.
EMPHASIS OF MATTER
We draw attention to Note 55(a) to the standalone financial statements, where in it is stated, that the Company has gross receivables of ' 923 million from a land owner, against whom winding up petitions has been ordered by the Hon' ble High Court of Judicature. Pending resolution of litigation against the land owner, these receivables are classified as recoverable by the Company based on rights under a Joint Development Agreement. Our opinion is not modified in respect of above matter.
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 for the financial year ended March 31, 2023. 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. 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 standalone 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 standalone 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 standalone 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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Revenue recognition from Contract with Customers (as described in note 2.6, 32 and 53 of the standalone financial statements)
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In accordance with the requirements of Ind AS 115, Company's revenue from sale of real estate inventory property (other than projects executed through joint development arrangements described below), is recognised at a point in time, which is upon the Company satisfying its performance obligation and the customer obtaining control of the promised asset.
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Our audit procedures included, among others, the following:
• We read the accounting policy for revenue recognition of the Company and assessed compliance of the policy in terms of principles enunciated under Ind AS 115.
• We, on a sample basis inspected the underlying customer contracts and assessed the management evaluation of
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Key audit matters
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How our audit addressed the key audit matter
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For revenue contract forming part of joint development
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determining revenue recognition from sale of real estate
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arrangements ('JDA') that are not jointly controlled
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inventory property at a point in time in accordance with the
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operations, the revenue from the development
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requirements under Ind AS 115.
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and transfer of constructed area/ revenue sharing
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• We understood and tested management process and controls
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arrangement and the corresponding land/ development
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around transfer of control in case of sale of real estate inventory
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rights received under JDA is measured at the fair value of
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property and further controls related to determination of
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the estimated construction service rendered to the land
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fair value of estimated construction service rendered to the
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owner. Such revenue is recognised over a period of time
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landowner in relation to projects executed through JDA.
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in accordance with the requirements of Ind AS 115.
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• We, on a sample basis inspected the sale deed and handover
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For contracts involving sale of real estate inventory
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documents, evidencing the transfer of control of the property
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property, the Company receives the consideration in
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to the customer based on which revenue is recognised at a
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accordance with the terms of the contract in proportion
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point in time.
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of the percentage of completion of such real estate
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• We on a sample basis inspected the underlying customer
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project and represents payments made by customers
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contracts to determine, whether the contracts with customers
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to secure performance obligation of the Company under the contract enforceable by customers. The assessment
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involved any financing element.
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of such consideration received from customers involves
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• We assessed the disclosures made in accordance with the
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significant judgment in determining if the contracts with
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requirements of Ind AS 115.
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customers involves any financing element.
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For projects executed during the year through JDA, on a sample
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Ind AS 115 requires significant judgment in determining
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basis:
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when 'control' of the property underlying the performance
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• We obtained and examined the computation of the fair value
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obligation is transferred to the customer. Further, for
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of the construction service under JDA.
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projects executed through JDA, significant estimate
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• We obtained the joint development agreements entered into
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is undertaken by management for determining the fair
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by the Company and compared the ratio of constructed area/
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value of the estimated construction service.
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revenue sharing arrangement between the Company and the
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As the revenue recognition involves significant estimates
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landowner as mentioned in the agreement to the computation
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and judgement, we regard this as a key audit matter.
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statement prepared by the management.
• We compared the fair value of the estimated construction service, to the project cost estimates and mark up considered by the management.
• We assessed the disclosures made in accordance with the requirements of Ind AS 115.
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Assessing the recoverability of carrying value of Investment property and investment properties under construction (as described in note 2.14, 2.15, 2.17, 5 and 6 of the standalone financial statements)
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As at March 31,2023, the carrying value of the Investment
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Our audit procedures included, among others, the following:
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property is ' 15,758 million (including properties under construction - ' 174 million). The carrying value of the investment property is calculated using land costs, construction costs, interest costs and other related costs. The Company reviews on a periodical basis whether there are any indicators of impairment of such investment properties,
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• We assessed the Company's valuation methodology and assumptions based on current economic and market conditions, applied in determining the recoverable amount.
• We obtained and read the valuation report used by the Company's management for determining the fair value ('recoverable amount') of the investment property.
• We considered the independence, competence and objectivity
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i.e., ensuring that its investment properties are carried at
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of the external specialist involved by the management in
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no more than their recoverable amount.
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determination of valuation.
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We considered the assessment of carrying value of
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• We assessed the Company's valuation methodology applied
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Investment property as a key audit matter due to
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and compared key property related data used as input with
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significance of the balance and significant estimates and judgement involved in impairment assessment.
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historical actual data.
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Key audit matters
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How our audit addressed the key audit matter
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• We assessed the key assumptions used in Company's valuation methodology including but not limited to discount rates, cashflows, etc.
• We compared the recoverable amount of the investment property to the carrying value in books.
• We assessed the disclosures made in the financial statements in this regard.
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Assessing the recoverability of carrying value of Inventory (including advances paid towards land procurement) and
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Refundable deposits paid under JDA (as described in note 2.7, 2.18, 2.20, 10, 13, 19 and 20 of the standalone financial statements)
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As at March 31, 2023, the carrying value of inventory
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Our audit procedures included, among others, the following:
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comprising of Work in progress and Stock of units in
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• We evaluated the design and operation of internal controls
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completed projects is ' 53,429 million. The inventory
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related to testing recoverable amounts with carrying amount
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is valued at the lower of the cost and net realisable
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of inventory and advances, including evaluating management
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value ("NRV”). The determination of the NRV involves
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processes for estimating future costs to complete projects.
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estimates based on prevailing market conditions and
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• We assessed the Company's methodology based on current
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taking into account the estimated future selling price,
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economic and market conditions, applied in assessing the
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cost to complete projects and selling costs.
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carrying value.
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As at March 31, 2023, the carrying value of land advance is ' 425 million and refundable deposits is
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• We obtained and tested the computation involved in assessment of carrying value including the NRV/ net
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' 2,188 million. Advances paid by the Company to the landowner/ intermediary towards outright purchase of
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recoverable value.
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land is recognised as land advance under other assets
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• We made inquiries with management to understand
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during the course of transferring the legal title to the
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key assumptions used in determination of the NRV/ net
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Company, whereupon it is transferred to land stock under
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recoverable value.
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inventories. For land acquired under joint development
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For inventory balance:
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agreement, the Company has paid Refundable deposits
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• We compared the total projected budgeted cost to the total
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for acquiring the development rights.
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budgeted sale value from the project.
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The aforesaid deposits and advances are carried at the
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• We compared the NRV to recent sales in the project or to the
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lower of the amount paid/ payable and net recoverable
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estimated selling price, applied in assessing the NRV.
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value, which is based on the management's assessment including the expected date of commencement and completion of the project and the estimate of sale prices
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• We compared the NRV to the carrying value in books. For land advance/ refundable deposits:
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and construction costs of the project.
We identified the assessment of the carrying value of inventory and land advances/ deposits as a key
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• We obtained and assessed the management assumptions based on current economic and market conditions, relating to launch of the project, development plan and future sales.
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audit matter due to the significance of the balance to
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• We obtained status update from the management and verified
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the standalone financial statements as a whole and
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the underlying documents for related developments in respect
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the involvement of estimates and judgement in the
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of the land acquisition and expected realization of deposit
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assessment.
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amount.
• We carried out external confirmation procedures on sample basis to obtain evidence supporting the carrying value of land advance and refundable deposits on sample basis.
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Key audit matters
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How our audit addressed the key audit matter
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Assessing impairment of Investments and loans and advances made by the Company in subsidiaries, joint ventures and
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associates (as described in note 2.20, 8, 9, 14 and 18 of the standalone financial statements)
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As at March 31,2023, the carrying values of Company's
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Our procedures in assessing the management's judgement for the
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investment in subsidiaries, joint ventures and associates
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impairment assessment included, among others, the following:
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amounted to ' 16,238 million. Further, the Company has
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• We examined the management assessment in determining
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granted loans and advances to its subsidiaries, joint
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whether any impairment indicators exist.
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ventures and associates amounting to '46,002 million as at March 31, 2023.
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As regards investments made:
• We assessed the Company's valuation methodology and
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Management reviews regularly whether there are any
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assumptions based on current economic and market
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indicators of impairment of the investments and loans and advances by reference to the requirements under
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conditions, applied in determining the recoverable amount.
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Ind AS.
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• We obtained and read valuation report of underlying property of the investee entity, if any, basis which the management had
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For cases where impairment indicators exist, management estimated the recoverable amounts of
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determined the recoverable amount.
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the investments, being higher of fair value less costs
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• We considered the independence, competence and objectivity
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of disposal and value in use. Significant judgements
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of the external specialist involved by the management, if any,
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are required to determine the key assumptions used in
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in determination of valuation.
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determination of fair value/ value in use.
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• We compared the recoverable amount of the investment to the
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We focused our effort on those cases with impairment
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carrying value in books as at March 31,2023.
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indicators. As the impairment assessment involves
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• We assessed the disclosures made in the standalone financial
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significant assumptions and judgement, we regard this
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statements regarding such investments.
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as a key audit matter.
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As regards loans and advances granted:
• We obtained and considered management evaluation based on current economic and market conditions, applied in determining the recoverability of loans and advances granted to its subsidiaries, joint ventures and associates.
• We assessed the financial condition of entities to whom loans and advances were granted by obtaining the most recent audited financial statements of such entities.
• We performed inquiries with management on the project status and future business plan of entities to whom loans and advances were granted to evaluate their recoverability.
• We assessed the disclosures made in the standalone financial statements regarding such loans and advances.
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OTHER INFORMATION
The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Annual report, but does not include the standalone financial statements and our auditor's report thereon. The Annual report is 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 and, in doing so, consider whether such other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE STANDALONE FINANCIAL STATEMENTS
The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance 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 the Companies (Indian Accounting Standards) Rules, 2015, as amended. 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 the 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. Those charged with governance are 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(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.
• 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 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.
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 for the financial year ended March 31, 2023
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.
OTHER MATTER
We did not audit the financial statements and other financial information as regards Company's net share in profits of partnership firm/ limited liability partnership investments (post tax) amounting to ' 903 million as at March 31, 2023. These Ind AS financial statements and other financial information of the said partnership firm/ limited liability partnership investments have been audited by other auditors, whose financial statements, other financial information and auditor's reports have been furnished to us by the management. Our opinion on the standalone financial statements, in so far as it relates to the amounts and disclosures included in respect of these partnership firm/ limited liability partnership investments and our report in terms of sub-sections (3) of Section 143 of the Act, in so far as it relates to the aforesaid Companies share of profits of partnership firm/ limited liability partnership investments, is based solely on the reports of such other auditors. Our opinion is not modified in respect of this matter.
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 1” 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 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;
(c) The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Statement of Cash Flow and Statement of Changes in Equity dealt
with by this Report are in agreement with the books of account;
(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
(e) On the basis of the written representations received from the directors as on March 31,2023 taken on record by the Board of Directors, none of the directors is disqualified as on March 31,2023 from being appointed as a director in terms of Section 164 (2) of the Act;
(f) With respect to the adequacy of the internal financial controls with reference to standalone financial statements and the operating effectiveness of such controls, refer to our separate Report in "Annexure 2” to this report;
(g) In our opinion, the managerial remuneration for the year ended March 31, 2023 has been paid / provided by the Company to its directors in accordance with the provisions of section 197 read with Schedule V to 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 on its financial position in its standalone financial statements - Refer Note 41 and Note 55 to the standalone financial statements;
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on longterm contracts including derivative contracts - Refer Note 31 to the standalone financial statements;
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, other than as disclosed in the Note 54 to the standalone 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, 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 have been received by the Company from any person(s) or entity(ies), including foreign entities ("Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
c) Based on such audit procedures performed 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 (a) and (b) contain any material misstatement.
v. The final dividend paid by the Company during the year in respect of the same declared for the previous year is in accordance with section 123 of the Act to the extent it applies to payment of dividend.
As stated in Note 22.5 to the standalone financial statements, the Board of Directors of the Company has proposed final dividend for the year 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. As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable for the Company only w.e.f. April 1,2023, reporting under this clause is not applicable.
For S.R. Batliboi & Associates LLP
Chartered Accountants ICAI Firm Registration Number: 101049W/E300004
per Adarsh Ranka
Partner
Membership Number: 209567 UDIN: 23209567BGXVZN7272
Place of Signature: Bengaluru, India Date: May 30, 2023
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