INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF PC JEWELLER LiMiTED
Report on the Audit of the Standalone Financial Statements Qualified
opinion
1. We have audited the accompanying standalone financial statements of Pc Jeweller limited ('the Company'), which comprise the Standalone Balance Sheet as at 31 March 2023, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Cash Flow Statement and the Standalone Statement of Changes in Equity for the year then ended and notes to the financial statements including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as "the standalone financial statements").
2. In our opinion and to the best of our information and accordingto the explanations given to us, except for the possible effectsof the matter described in the Basis for Qualified Opinionsection of our report, the aforesaid standalone financialstatements give the information required by the CompaniesAct, 2013 (' the Act') in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards ("Ind AS") prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India, ofthe state of affairs of the Company as at 31 March 2023 and itsloss (including other comprehensive income), its cash flowsand the changes in equity for the year ended on that date.
3. Basis for Qualified opinion
(i) As explained in Note 51 to the accompanying standalone financial statements, the Company during the financial year ended 31 March 2019 had provided discounts of ? 513.65 crore to its export customers which had been adjusted against the revenues for the said year. The Company had initiated the process of complying with the requirements of the Master Circular on Exports of Goods and Services issued by the Reserve Bank of India and had filed the necessary applications with the appropriate authority for approval of such discounts, which is a prerequisite, under the Foreign Exchange Management Act, 1999. Subsequently, the Company has obtained the approvals from the authorized dealer banks for reduction in receivables corresponding to discounts amounting to ? 330.49 crore. For the remaining discounts of ?183.16 crore, in the absence of requisite approvals
and material evidence related to such transactions, we are unable to comment on the impact, if any, of the same on the accompanying standalone financial statements. Auditor's Opinion for the year ended 31 March 2019, 31 March 2020, 31 March 2021 and 31 March 2022 were also modified in respect of this matter.
(ii) With respect to provision for the expected credit loss/impairment relating to overdue overseas Trade Receivables as required under Ind-AS 109, the management has calculated an additional provision of ? 11.96 crores during the year in respect of these overdue receivables. However, no realization has been made during the year against overdue trade receivables towards export of goods aggregating to ? 1707.27 crores (including unrealized foreign currency exchange gain of ? 239.74 crores) as on 31 March 2023 out of which ? 1355.56 crores (including unrealized foreign currency exchange gain of ? 197.04 crores) is outstanding from more than 3 years. Also no export transactions have been done with these overseas debtors during the year. Further, as informed to us, legal notices have been served to the overseas debtors and the company is in process of finalizing legal counsel for initiating legal proceedings. Upto 31 March 2023, the company has made an ECL provision of only ? 262.59 crore based on revised payment schedule as provided by the overseas debtors.
Despite of no realization as per the scheduled expected dates from the export receivables and considering the initiation of legal route for recovery during the year, we are unable to examine adequacy of the provision for expected credit losses and its consequential impact and adjustments on the accompanying standalone financial statements.
(iii) As explained in Note 50 to the accompanying standalone financial statements, due to rejection of the resolution plan by the Lenders, the Lead Bank has initiated the recovery proceedings through Debt Recovery Tribunal (DRT) and obtained an order to seize, take control and prepare an inventory of entire stocks of hypothecated assets to the lenders. In response, the company has moved to the Debts Recovery Appellate Tribunal (DRAT) against the order of the DRT, and the matter is sub-judice. Meanwhile some of the other consortium members have also filed their recovery suit in DRT against the company.
According to the Order of DRT and DRAT, the appointed agencies along with valuers have started necessary implementation of the Order including inventorization and valuation of inventory at some locations of the company. Since, those locations were carrying major inventory and were under process of inventorization and valuation as per the order of DRT/DRAT as on 31 March 2023, the physical verification/inspection/ valuation of the inventory could not be conducted by the management at these locations. This, being a significant event, may have an adverse impact on the Goodwill and the Brand image of the company which may affect the Net Realisable Value of the Inventory. Further, significant quantum of inventory was lying with Third Parties (Karigars/Job-Workers) which could not be physically verified/inspected by independent agency/ lenders. Such inventory lying with third parties is not adequately insured.
Further, no valuation reports by the independent Gemologist/valuer were made available to us for the inventory as shown in accompanying standalone financial statements.
In view of the above, we are unable to examine and express an opinion on inventory value and its consequential impact and adjustments on the accompanying standalone financial statements.
4. We conducted our audit in accordance with the Standards on Auditing ('SAs') 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 ('the ICAI') 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 thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence obtained by us, is sufficient and appropriate to provide a basis for our qualified opinion.
Material Uncertainty related to Going Concern
5. Rejection of proposed resolution plan in relation to company's borrowing exposure, Order of DRT for initiation of full recovery proceedings on application of lead bank (SBI) and issuance of recall notices by the lenders, as explained in Note 50 to the accompanying standalone financial
statements, indicates that a material uncertainty exists that may cast significant doubt on the ability of the company to continue as a going concern.
Our opinion is not modified in respect of this matter.
Emphasis of Matters
6. We draw attention to:
(i) Note 52 to the accompanying standalone financial statements regarding the delays in receipt of proceeds denominated in foreign currency against export of goods made by the company to its overseas customers aggregating to ? 1707.27 crores as on 31 March 2023, beyond the timelines stipulated under the Foreign Exchange Management Act, 1999. The management of the company has filed the necessary applications with the appropriate authority for condonation of such delays to regularize the default. Pending condonation of such delay by the appropriate authority, management is of the view that the possible penalties that may be levied, are currently unascertainable but would not be material and accordingly, no consequential adjustments have been made to the accompanying standalone financial statements with respect to such delay/default.
(ii) Note 53 to the accompanying standalone financial statements regarding impairment assessment of company's total exposure in its subsidiaries. The management of the company has carried out the impairment assessment using the 'Discounted Cash Flow Valuation Model', which is complex and involves the use of significant management estimates and assumptions that are dependent on expected future market and economic conditions and accordingly recognized additional provision for impairment amounting to ? 104.15 crores in respect of exposure in PC Universal Private Limited in the standalone financial statements of the company.
Our opinion is not modified in respect of the above matters.
Key Audit Matters
7. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Except for the matters described in the Basis for Qualified Opinion section and material uncertainty related to the going concern section, we have determined that there are no other key audit matters to be communicated in our report.
information other than the Standalone Financial Statements
and Auditor's Report thereon
8. The Company's Management and Board of Directors are responsible for the preparation of other information. The other information comprises the information included in the Company's annual report, but does not include the standalone financial statements and our auditor's report thereon. The annual report is to be made available to us after the date of the 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 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 during the course of audit, or otherwise appears to be materially misstated.
When we read the other information identified above, if we conclude thatthere is a material misstatement therein, weare required to communicate the matter to those charged with governance and take necessary actions as per applicable laws and regulations.
Responsibilities of Management and those Charged with
Governance for the Standalone financial Statements
9. The accompanying standalone financial statements havebeen approved by the Company's Board of Directors.The Company's Board of Directors is responsible for thematters stated in section 134(5) of the Act with respect tothe preparation of these standalone financial statementsthat give a true and fair view of the financial position,financial performance including other comprehensiveincome, changes in equity and cash flows of the Companyin accordance with the accounting principles generallyaccepted in India, including the Ind AS specified undersection 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assetsof the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriateaccounting policies; making judgments and estimates thatare reasonable and prudent; and design,
implementationand maintenance of adequate internal financial controls,that were operating effectively for ensuring the accuracyand completeness of the accounting records, relevant to thepreparation and presentation of the financial statementsthat give a true and fair view and are free from materialmisstatement, whether due to fraud or error.
10. 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.
11. The Board of Directors are also responsible for overseeing the company's financial reporting process.
auditor's Responsibilities for the audit of the Standalonefinancial Statements
12. 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.
13. 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 financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for
expressing our opinion on whether the company has adequate internal financial controls with reference to standalone financial statements in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management.
• Conclude on the appropriateness of Management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
14. 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.
15. 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.
16. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public interest benefits of such communication.
Other Matter
17. Advance recoverable from Staff amounting to ? 2.12 crore (including ? 1.13 crore pertaining to Key Managerial Personnel) has been written off during the year after taking approvals from the board of directors as well as Audit Committee.
18. As mentioned in the order of the DRAT, a special audit has been ordered by bankers to audit the exchange sales transactions without payment of cash/ transfer of money, and to submit weekly details of Exchange Sales to Agency for Specialized Monitoring (ASM) appointed by lenders for his verification. As per the information furnished to us, including the reports of ASM, the company has recorded exchange sales of ? 1795.70 crore approx. (including GST) out of total sales of ? 2424.32 crore (including GST) for the year ended 31 March 2023.
Our opinion is not modified in respect of the above matters.
Report on Other Legal and Regulatory Requirements
19. As required by section 197(16) of the Act, based on our audit and to the best of our information and according to the explanations given to us, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limit prescribed under Schedule V of the Act.
20. 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, to the extent applicable.
21. As required by Section 143(3) of the Act, we report that:
(a) we have sought and except for the matter described in the Basis for Qualified Opinion section, 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) except for the possible effects of the matter described in the Basis for Qualified Opinion section, 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 accounts;
(d) except for the possible effects of the matter described in the Basis for Qualified Opinion section, in our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
(e) 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;
(f) the qualifications relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion section;
(g) we have also audited the internal financial controls with reference to financial statements of the Company as on 31 March 2023 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report as per "Annexure B" expressed 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 44 to the standalone financials statements, has disclosed the impact of pending litigations 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 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 31 March 2023.
iv. (a) The Management has represented that, to the
best of its knowledge and belief, 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 or entity, 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 by or on behalf of the company ("Ultimate Beneficiaries")
• provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(b) The management has represented, that, to the best of it's knowledge and belief, no funds have been received by the company from any persons or entities, 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 by or on behalf of the Funding Party ("Ultimate Beneficiaries")
• provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
(c) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material mis-statement.
v. No dividend has been declared or paid during the year by the company.
vi. Since applicability of maintenance of audit trail in accounting software has been deferred to 1 April 2023, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended 31 March 2023.
For Arun K Agarwal & Associates
Chartered Accountants
(Firm's Registration No. 003917N)
Sd/-
Arun Kumar Agarwal
(Partner)
M. No. 082899
UDIN: 23082899BGXXGO6293
Place: New Delhi
Date: 30.05.2023
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