We have audited the standalone financial statements of SAMHI Hotels Limited (the "Company") which comprise the standalone balance sheet as at 31 March 2024, and the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including material 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 ("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 31 March 2024, and its loss and 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 thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.
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 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.
IMPAIRMENT ASSESSMENT OF PROPERTY, PLANT AND EQUIPMENT, RIGHT OF USE ASSETS AND OTHER INTANGIBLE ASSETS
See Note 56(a) to the standalone financial statements
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The key audit matter
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How the matter was addressed in our audit
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As at 31 March 2024, the carrying value of property, plant and equipment, right of use assets and other intangible assets amounts to Rs. 2,244.23 million (net of impairment loss of Rs. 146.85 million).
In accordance with the requirements of Ind AS 36 "Impairment of Assets", the Company periodically assesses whether there is any indication for impairment in relation to such property, plant and equipment, right of use assets and other intangible assets at a cash generating unit (CGU) level. If any such indication exists, the Company estimates the recoverable amount of these assets. Further, the Company also periodically assesses whether there are any impairment reversals.
To assess the recoverability of the CGU, management is required to make significant estimates and assumptions related to forecast of future revenue, operating margins, exit multiple and discount rates. The recoverable amount of the CGU determined based on value in use, has been derived from discounted cash flow model.
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Our audit procedures included:
• Tested the design, implementation, and operating effectiveness of key controls over the impairment assessment process.
• Assessed the indicators of impairment (including impairment reversal) in assets at CGU level based on consideration of external and internal factors affecting the value and performance of CGU.
• Obtained management assessment of recoverable amount of CGU where indicator of impairment (including impairment reversal) is identified and performed the following procedures:
a. Obtained an understanding of the Company’s process for projecting the future cash flows for determining the recoverable amount of CGUs.
b. Evaluated the key market related assumptions such as discount rate and exit multiple with assistance of our internal valuation specialist. We also performed sensitivity analysis over these assumptions.
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The key audit matter
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How the matter was addressed in our audit
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In view of the significance of these assets and involvement of judgements and estimates in impairment assessment of property, plant and equipment, right of use assets and other intangible assets, this area has been identified as a key audit matter.
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c. Assessed the reliability of cash flow forecasts through a retrospective review of actual performance in comparison to budgets.
d. Evaluated the reasonableness of the assumptions used in the cash flow forecasts which includes occupancy rate, average room rate and operating margins. To consider forecasting risk we also performed sensitivity analysis over these assumptions.
• Evaluated the adequacy of the disclosures made in the standalone financial statements in accordance with the applicable accounting standards.
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IMPAIRMENT ASSESSMENT OF INVESTMENTS IN SUBSIDIARIES
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See Note 55 and 56(b) to the standalone financial statements
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The key audit matter
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How the matter was addressed in our audit
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In accordance with the requirements of Ind AS 36 "Impairment of Assets", the Company performs an impairment assessment of its investments in subsidiaries. Further, the Company also periodically assesses whether there are any impairment reversals. As at 31 March 2024, the net value of investments is Rs. 27,506.23 million (net of impairment loss of Rs. 4,018.96 million).
The Company estimates the recoverable value of its investments in subsidiaries where impairment risk is identified. The recoverable amount of the investments determined based on value in use, has been derived from discounted cash flow model. To assess the recoverable value, management is required to make significant estimates and assumptions related to forecast of future revenue, operating margins, exit multiple and discount rates.
Consequent to such impairment assessment, the Company has recorded an impairment reversal of Rs. 990.74 million against such investments in the current year.
In view of the significance of these investments and involvement of judgements and estimates, in impairment assessment, this area has been identified as a key audit matter.
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Our audit procedures included:
• Tested the design, implementation, and operating effectiveness of key controls over the impairment assessment process.
• Assessed the indicators of impairment (including impairment reversal) in investments based on consideration of external and internal factors affecting the value and performance of investments.
• Obtained management assessment of recoverable amount of investments where indicator of impairment (including impairment reversal) is identified and performed the following procedures:
a. Obtained an understanding of the Company’s process for projecting the future cash flows for determining the recoverable amount of investments.
b. Evaluated the key market related assumptions such as discount rate and exit multiple with assistance of our internal valuation specialist. We also performed sensitivity analysis over these assumptions.
c. Assessed the reliability of cash flow forecasts through a retrospective review of actual performance in comparison to budgets.
d. Evaluated the reasonableness of the assumptions used in the cash flow forecasts. To consider forecasting risk we also performed sensitivity analysis over these assumptions.
• Evaluated the adequacy of the disclosures made in the standalone financial statements in accordance with the applicable accounting standards.
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REVENUE RECOGNITION
See Note 28 to the standalone financial statements
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The key audit matter
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How the matter was addressed in our audit
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The Company is principally engaged in the business of owning hotels. It’s revenue comprises hotel revenue (including room revenue, food and beverage revenue and revenue from recreation and other services).
The accounting policies for different revenue streams are set out in Note 2.11 to the standalone financial statements. Revenue is a key performance indicator of the Company and there is risk of overstatement of revenue due to fraud resulting from pressure to achieve targets and earnings expectations. Considering the above, we have identified revenue recognition as a key audit matter.
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Our audit procedures included:
• Tested the design, implementation and operating effectiveness of the key controls of the revenue recognition process.
• Tested the Company’s revenue recognition accounting policies are consistent with the applicable accounting standards.
• Using statistical sampling basis, tested the revenue transactions recorded during the year (including year-end cut off testing) with the underlying documents such as invoices, bank collections and other relevant documents, as applicable.
• Tested the journal entries relating to revenue recognised during the year based on specified risk-based criteria, to identify unusual or irregular items.
• Evaluated the adequacy of disclosures relating to the revenue recognition made in the standalone financial statements in accordance with the applicable accounting standards.
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OTHER INFORMATION
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 financial statements and auditor’s report thereon. The Company's 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 will not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
MANAGEMENT'S AND BOARD OF DIRECTORS' RESPONSIBILITIES FOR THE STANDALONE FINANCIAL STATEMENTS
The Company’s Management and Board of Directors are 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 state of affairs,
profit/ loss and other comprehensive income, changes in equity and cash flows 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. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the 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, the 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 the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The 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(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 the Management and Board of Directors.
• Conclude on the appropriateness of the Management and Board of Directors use of the going concern basis of accounting in preparation of standalone financial statements 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.
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 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 Section 143(11) 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. 2 A. 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, except for the following:
(i) the back-up of accounting softwares used for maintaining general ledger, food and beverage revenue records, payroll records and procure to pay records which forms part of the 'books of account and other relevant
books and papers in electronic mode’ have not been kept on servers physically located in India on a daily basis.
(ii) the back-up of one of the accounting software used for maintaining general ledger which forms part of the 'books of account and other relevant books and papers in electronic mode’ has not been kept on server physically located in India on a daily basis during 1 April 2023 till 29 June 2023; and
(iii) for the matters stated in the paragraph 2B(f) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.
c. The standalone balance sheet, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flows 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 Ind AS specified under Section 133 of the Act.
e. On the basis of the written representations received from the directors as on 15 April 2024 to 19 April 2024 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2024 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 paragraph 2A(b) above on reporting under Section 143(3)(b) of the Act and paragraph 2B(f) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.
g. With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".
B. 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, in our opinion and to the best of our information and according to the explanations given to us:
a. The Company has disclosed the impact of pending litigations as at 31 March 2024 on its financial position in its standalone financial statements - Refer Note 37(b) to the standalone financial statements.
b. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
c. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
d. (i) The management has represented that, to
the best of their knowledge and belief, as disclosed in the Note 50(v) 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 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.
(ii) The management has represented that, to the best of their knowledge and belief, as disclosed in the Note 50(vi) to the standalone financial statements, 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 directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Parties ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(iii) Based on the 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 subclause (i) and (ii) of Rule 11(e), as provided under (i) and (ii) above, contain any material misstatement.
e. The Company has neither declared nor paid any dividend during the year.
f. Based on our examination which included test checks, except for the instances mentioned below, the Company has used accounting softwares for
maintaining its books of account which have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the respective softwares:
i. In the absence of sufficient and appropriate reporting on compliance with the audit trail requirements in the respective independent auditor's reports of service organisations available for part of the year and in the absence of the independent auditor's reports of service organisations for the balance period, for accounting softwares used for maintaining the books of account relating to general ledger, food and beverage revenue, payroll and procure to pay process, which are operated by third-party software service providers, we are unable to comment whether audit trail feature for the said softwares was enabled and operated throughout the year for all relevant transactions, recorded in the respective softwares.
ii. The feature of recording audit trail (edit log) facility was not enabled at the database level to log any direct data changes for the accounting software used for maintaining the books of account relating to revenue process.
iii. The feature of recording audit trail (edit log) facility was not enabled for the accounting software used for maintaining the books of account relating to general ledger.
Further, for the periods where audit trail (edit log) facility was enabled and operated for the respective accounting softwares, we did not come across any instance of the audit trail feature being tampered with except that in case of one of the accounting software used for maintaining general ledger, due to limitations in the system configuration, we are unable to comment whether there were any instances of the audit trail feature being tampered with.
C. With respect to the matter to be included in the Auditor’s Report under Section 197(16) of the Act:
I n our opinion and according to the information and explanations given to us, the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) of the Act which are required to be commented upon by us.
For B S R & Co. LLP
Chartered Accountants Firm’s Registration No.:101248W/W-100022
Rahul Nayar
Partner
Place: Gurugram Membership No.: 508605
Date: 29 May 2024 ICAI UDIN:24508605BKGUMR903
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