Alok Industries LimitedReport on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of Alok Industries 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 Loss, the Cash Flow Statement 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 loss including other comprehensive loss, its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit ofthe 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 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 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 33 of the standalone financial statements in respect of the resolution plan approved by the National Company Law Tribunal vide its order dated March 8, 2019 under section 31(1) of the Insolvency and Bankruptcy Code, 2016. Based on the resolution plan, read with the legal opinion, the Company has accounted the assigned debt at cost, overriding the Indian Accounting Standards which would require the Company to recognize the assigned debt at its fair value and accordingly the imputed interest cost over the period of the loan. Our opinion is not modified in respect of this 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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A. Recoverability of loan given to wholly owned subsidiary
The Company had in earlier years given loan to Alok Infrastructure
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Our audit procedures included the following:
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Limited (a wholly owned subsidiary of the Company or “AIL”). As at March 31, 2023, the outstanding balance of loan is ' 182.12 crores (net of impairment allowance of ' 1,190.87 crores). AIL does not have
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• Obtained and read the audited financial statements of Alok Infrastructure Limited for the year ended March 31, 2023.
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significant business operations and has made a loss of ' 12.84 crores
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• Performed inquiry procedures with the auditors of Alok
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for the year ended March 31, 2023 and has accumulated losses of
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Infrastructure Limited and discussed the audit procedures
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' 1,505.23 crores as on March 31, 2023.
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performed by them on the valuation report issued by the
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To assess the recoverability of the outstanding loan, the Company has considered the valuation of the AIL's investment properties /
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external specialists in respect of the subsidiary's investment properties/ inventories.
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inventories performed by the subsidiary with the help of external
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• Assessed key valuation aspects of the investment properties
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valuation specialists and has accordingly assessed that there is no
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/ inventories along with sensitivity analysis of assumptions
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further impairment provision required for the year ended March 31,
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of Alok Infrastructure Limited by engaging internal valuation
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2023.
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specialists.
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Considering the assumptions / judgment used in valuation under
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• Assessed the disclosures made in the standalone financial
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the sales comparison method of market approach / depreciation replacement cost method under cost approach, the same has been considered as a key audit matter. Refer Note 6 and 48 of the standalone financial statements.
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statements.
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B. Recoverability of carrying value of property, plant and equipment
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As at March 31, 2023 the Company has Property, plant and equipment of ' 5,219.89 crores. In earlier years consequent to the business plan approved by the re-constituted Board of Directors of the Company, the Company had through an external valuation specialist determined the value in use of property, plant and equipment and recorded an
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Our audit procedures included the following:
• We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that the Company has in relation to impairment review processes.
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impairment provision of ' 8,227.80 crores in the books.
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• We assessed the Company's valuation methodology applied in determining the recoverable amount. In making this
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Based on recent business developments and changes in economy, the Board has made required revisions to the business plan and has accordingly updated the value in use calculations using the
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assessment, we evaluated the competence and objectivity of Company's internal specialists involved in the process.
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discounted cash flow method with the help of an external valuation
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• We assessed the assumptions around the key drivers of the
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specialist. Based on the same, the Company has determined there are
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cash flow forecasts including discount rates, expected growth
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no material adjustments required to the impairment allowance already
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rates and terminal growth rates used.
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recorded. The value in use is sensitive to changes in certain inputs /
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• We discussed with the management changes in key drivers as
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assumptions used for forecasting the discounted cash flow projections
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compared to the previous year to evaluate the reasonableness
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due to inherent uncertainty involved in these assumptions.
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of the inputs and assumptions used in the cash flow forecasts.
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Accordingly, the same has been considered as a key audit matter.
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• Assessed the disclosures made in the standalone financial statements.
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C. Contingent liabilities
As at March 31, 2023, the Company had the following matters where
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Our audit procedures included the following:
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management has assessed the possibility of outflow of resources
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• Obtained and read the long-term gas supply agreement
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embodying economic benefits.
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between the Company and GAIL India Limited
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a) Take or pay obligation under the long term gas sale
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• Assessed the management's position through discussions
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agreement with GAIL India Limited. Refer Note 36 of
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with the in-house legal expert.
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financial statements.
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• Discussed with the management on the development in these
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b) Tax liabilities with respect to open assessments for
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matters during the year ended March 31, 2023 along with
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assessment years prior to the closing date as per the
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obtaining underlying documentation for the same, including
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NCLT approved resolution plan. Refer Note 36 of financial
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communication with counterparties.
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statements.
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• Examined the management assessment with respect to
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Management's judgement regarding recognition and measurement of provisions for these matters is inherently uncertain and might
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possibility of outflow of resources embodying economic benefits in relation to these matters, including independent
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change over time as the outcomes of the litigations / discussions are determined.
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opinion obtained by the management by involving legal specialists.
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Accordingly, it has been considered as a key audit matter.
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• Evaluated the objectivity and independence of the legal specialists.
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• Reviewed the disclosures made in the financial statements in this regard.
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• Obtained representation letter from the management on the assessment of these matters.
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We have determined that there are no other key audit matters to communicate in our report
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.
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 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.
Responsibilities of Management 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 loss, 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.
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 Loss, the Cash Flow Statement 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 these 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 36 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 long-term contracts including derivative contracts;
iii. There were no amounts which were 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 49 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 or entity, 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, other than as disclosed in the note 49 to the standalone financial statements, no funds have been received by the Company from any person or entity, 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. No dividend has been declared or paid during the year by the Company.
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 B C & CO LLP
Chartered Accountants
ICAI Firm Registration Number: 324982E/E300003
per Pramod Kumar Bapna
Partner
Membership Number: 105497
UDIN: 23105497BGXBNJ8713
Place: Mumbai
Date: April 19, 2023
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