To the Members of Avenue Supermarts Limited
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of AvenueSupermarts Limited ("the Company") which comprise the Balance Sheet as at March31 2020 the Statement of Profit and Loss including the statement of Other ComprehensiveIncome the Cash Flow Statement and the Statement of Changes in Equity for the year thenended and notes to the financial statements including a summary of significantaccounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Companies Act_ 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020its profit including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' section ofour 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 ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone Ind AS financial statements for the financialyear ended March 31 2020. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. For each matter below ourdescription 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 becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the standalone Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the standalone Ind AS financial statements.
The results of our audit procedures including the procedures performed to address thematters below provide the basis for our audit opinion on the accompanying standalone IndAS financial statements.
|Key audit matters ||How our audit addressed the key audit matter |
|Assessment of impairment of investment in subsidiary: Avenue E-Commerce Limited ("AEL") (as described in note 1.f of the standalone Ind AS financial statements) || |
The Company has an investment amounting to Rs. 252.76 crore as at March 31 2020 in its subsidiary Avenue E-Commerce Limited.
|Our audit procedures in respect of assessment impairment of Investment in Avenue Ecommerce Limited included the following: |
|This subsidiary commenced business four years back and has had continued losses which provides an indicator for impairment in the investment. || We assessed the Company's valuation methodology applied in determining the fair market value of equity shares. In making this assessment we evaluated the objectivity and independence of Company's specialists involved in the process; |
|Management has used external specialist to support the recoverable amounts of its investment based on fair market value of equity shares of AEL as at March 31 2020 after taking into consideration the potential impact of COVID 19. || We involved valuation expert to assist in evaluating the key inputs along with comparable transaction multiples of peers of the Company available in the public domain and discount rate on multiple considered for valuation purpose; |
|We determined this area as a key audit matter because of the judgmental factors involved in testing for impairment and the significant carrying value of the investment. || We obtained and read the audited Ind AS financial statements of the subsidiary to determine the net worth cash flows and other financial indicators; |
| || We also assessed the Company's disclosures concerning this in Note 1.f on significant accounting estimates and judgements and Note 6 of Investment in Subsidiaries to the standalone Ind AS financial statements. |
|Allowance for inventory shrinkages (as described in note 1.j and 1.w of the standalone Ind AS financial statements) || |
|As at March 31 2020 the carrying amount of inventories amounted to Rs. 1909.43 crore after considering allowances for Inventory shrinkages of Rs. 17.30 crore. These inventories are held at the stores and distribution centres of the Company. ||Our procedures over allowance for inventory shrinkage included the following: |
|Allowance for Inventory shrinkage was an audit focus area since inventory cycle counts were carried out at periodical intervals during the year and further significant judgement is involved in identifying the amount of provision for shrinkages. || We obtained an understanding evaluated the design and tested the operating effectiveness of controls that the Company has in relation to allowance for inventory shrinkage; |
| || We performed testing on the Company's controls over the inventory cycle count process. In testing these controls we observed the inventory cycle count process at selected store and distribution centres on a sample basis inspected the results of the inventory cycle count and confirmed variances were accounted for and approved by management. |
| || Assessed the stock shrinkage provision by assessing the level of inventory write downs during the period and applying the shrinkage rate as determined location wise to the year end stock. |
| ||We tested on a sample basis the shrinkage rate used to calculate the provision for each store and distribution centre. |
| || On account of the COVID 19 imposed lockdown the Company was unable to carry on its physical verification of inventory in the last two weeks of March 2020 as planned however the locations scheduled for the physical verification in the last two weeks had been verified during the year as planned and accordingly the shrinkage rates have been used for these locations as per the last count. |
| || We assessed the Company's disclosures concerning this in Note 1.j and 1.r on significant accounting estimates and judgements and Note 9 Inventories to the standalone Ind AS financial statements. |
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe standalone Ind AS financial statements and our auditor's report thereon.
Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether suchother information is materially inconsistent with the standalone Ind AS financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Responsibilities of Management for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign 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 hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone Ind AS financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone IndAS financial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone Ind AS financialstatements for the financial year ended March 31 2020 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure 1" a statement on the matters specified inparagraphs 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 bestof 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 theCompany so far as it appears from our examination of those books;
(c) The Balance Sheet Statement of Profit and Loss including the Statement of OtherComprehensive Income the Cash Flow Statement and Statement of Changes in Equity dealtwith by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe 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 March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March_31_2020 from being appointed as a director in terms of Section 164 (2) ofthe Act;
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these standalone Ind AS financial statementsand 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 2020 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule_ 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
i) The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements Refer Note 37 to thestandalone Ind AS financial statements;
ii) The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses
iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
to the Independent Auditor's Report of even date on the Ind AS Financial Statements ofAvenue Supermarts Limited (the Company')
(i) (a) The Company has maintained proper records showing full including quantitativedetails and situation of fixed assets.
(b) Fixed assets have been physically verified by the management during the year and nomaterial discrepancies were identified on such verification.
(c) According to the information and explanation given by the management the titledeeds of immovable property included in property plant and equipment are held in the nameof the Company out of which for land properties aggregating 345.35 crore as at March 312020 mutation of land is in progress.
| || || ||(Rs. in Crores) |
|Total number of cases ||Asset category ||Gross Block as on March 31 2020 ||Net Block as on March 31 2020 |
|24 ||Freehold land ||345.35 ||345.35 |
(ii) The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on such physicalverification.
(iii) (a) According to the information and explanations given to us the Company hasnot granted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii) (a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usprovisions of section 185 and 186 of the Companies Act 2013 in respect of loans todirectors including entities in which they are interested and in respect of loans andadvances given investments made and guarantees and securities given have been compliedwith by the Company.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under Section 148(1) of the Companies Act 2013for the products of the Company.
(vii) (a) According to the information and as explanation given to us and the recordsof the Company examined by us in our opinion the Company is generally regular indepositing with appropriate authorities undisputed statutory dues including providentfund employees' state insurance labour welfare fund profession tax income tax goodsand service tax customs duty cess and other material statutory dues applicable to it.
(b) According to the information and explanations given to us there are no undisputedstatutory dues including provident fund employees' state insurance labour welfare fundprofession tax income-tax goods and service tax customs duty cess and other materialstatutory dues which were outstanding at the year-end for a period of more than sixmonths.
(c) According to the records of the Company the dues outstanding of income-taxsales-tax service tax on account of any dispute are as follows:
|Name of the Statute ||Nature of Dues ||Unpaid amount involved (Rs. in crore) * ||Period to which the amount relates ||Forum where dispute is pending |
|Finance Act 1994 ||Service tax ||0.52 ||2008-2013 ||Commissioner of Service tax |
|Gujarat Value Added Tax Act 2003 ||Value added tax ||0.18 ||2014-2015 ||Joint Commercial Tax Commissioner |
|Maharashtra Value Added Tax Act 2002 ||Value added tax ||0.19 ||2011-2012 ||Joint Commercial Tax Commissioner |
|Madhya Pradesh Value Added Tax Act 2002 ||Value added tax ||0.18 ||2015-2016 ||Deputy Commissioner of Commercial Tax |
|Madhya Pradesh Value Added Tax Act 2002 ||Entry tax ||0.34 ||2015-2016 ||Deputy Commissioner of Commercial Tax |
|Madhya Pradesh Value Added Tax Act 2002 ||Value added tax ||0.14 ||2016-2017 ||Deputy Commissioner of Commercial Tax |
|Madhya Pradesh Value Added Tax Act 2002 ||Entry tax ||0.03 ||2016-2017 ||Deputy Commissioner of Commercial Tax |
|Income Tax Act 1961 ||Late Deduction of TDS ||3.12 ||2019-2020 ||Commissioner of Income Tax Appeal |
|Income Tax Act 1961 ||Short Deduction/Late Deduction of TDS ||0.12 ||2007-2008 to 2014-2015 ||Assessing Officer |
* The unpaid amount mentioned above is net of Rs. 0.57 crore paid under protest
(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowing to a bank ordues to debenture holders. There are no dues payable to any financial institution andgovernment.
(ix) In our opinion and according to information and explanation given by themanagement monies raised by the Company by way of initial public offer and term loanswere applied for the purpose for which they were raised.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the Company or no material fraud onthe Company by the officers and employees of the Company has been noticed or reportedduring the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.
(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe financial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given by the management the Companyhas complied with provisions of section 42 of the Companies Act 2013 in respect of theprivate placement of shares during the year. According to the information and explanationsgiven by the management we report that the amount raised have been used for the purposesfor which the funds were raised except for idle funds amounting to Rs. 3068.00 crorewhich were not required for immediate utilization and which have been invested in depositswith scheduled commercial banks. The maximum amount of idle funds invested during the yearwas Rs. 4098.00 crore of which Rs. 3068.00 crore was outstanding at the end of theyear.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in section 192 of Companies Act 2013.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act. According to the information and explanations given to us theprovisions of section 45-IA of the Reserve Bank of India Act 1934 are not applicable tothe Company.
to the Independent Auditor's Report of Even Date on The Standalone Ind As FinancialStatements of Avenue Supermarts Limited
Report on the Internal Financial Controls under Clause
(i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of AvenueSupermarts Limited ("the Company") as of March_31_2020 in conjunction with ouraudit of the standalone Ind AS financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements based on our audit. We conducted our audit in accordance with the Guidance Noteon Audit of Internal Financial Controls Over Financial Reporting (the "GuidanceNote") and the Standards on Auditing as specified under section 143(10) of the Actto the extent applicable to an audit of internal financial controls and both issued bythe Institute of Chartered Accountants of India. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting with reference to these standalone Ind AS financial statements was establishedand maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting with reference to thesestandalone Ind AS financial statements and their operating effectiveness. Our audit ofinternal financial controls over financial reporting included obtaining an understandingof internal financial controls over financial reporting with reference to these standaloneInd AS financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgement includingthe assessment of the risks of material misstatement of the financial statements whetherdue to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the internal financial controls over financialreporting with reference to these standalone Ind AS financial statements.
Meaning of Internal Financial Controls Over Financial Reporting With Reference to theseStandalone Ind AS Financial Statements
A company's internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally acceptedaccounting principles. A company's internal financial control over financial reportingwith reference to these standalone Ind AS financial statements includes those policies andprocedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the company's assets that could have a material effecton the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting WithReference to these Standalone Ind AS Financial Statements
Because of the inherent limitations of internal financial controls over financialreporting with reference to these standalone Ind AS financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these standalone Ind AS financial statements to future periods are subject to the riskthat the internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.
In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements and such internal
financial controls over financial reporting with reference to these standalone Ind ASfinancial statements were operating effectively as at March_31 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.