To The Members of Blue Star Limited
Report on the Audit of the Consolidated Financial Statements Opinion
We have audited the accompanying consolidated financial statements of Blue Star Limited(the "Parent") and its subsidiaries (the Parent and its subsidiaries togetherreferred to as the "Group") which includes the Group's share of profit/loss inits joint venture which comprise the Consolidated Balance Sheet as at March 312020 andthe Consolidated Statement of Profit and Loss (including Other Comprehensive Income) theConsolidated Cash Flow Statement and the Consolidated Statement of Changes in Equity forthe year then ended and a summary of significant accounting policies and otherexplanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us and based on the consideration of reports of the subsidiary and a jointventure referred to in the Other Matters section below the aforesaid consolidatedfinancial statements give the information required by the Companies Act 2013 (the"Act") in the manner so required and give a true and fair view in conformitywith the Indian Accounting Standards prescribed under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended ("Ind AS") andother accounting principles generally accepted in India of the consolidated state ofaffairs of the Group as at March 312020 and their consolidated profit theirconsolidated total comprehensive income their consolidated cash flows and theirconsolidated changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the consolidated financial statements in accordance with theStandards on Auditing specified under section 143 (10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibility for the Audit of the Consolidated Financial Statements section of ourreport. We are independent of the Group and joint venture in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (ICAI) together with theethical requirements that are relevant to our audit of the consolidated financialstatements under the provisions of the Act and the Rules made thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theICAI's Code of Ethics. We believe that the audit evidence obtained by us and the auditevidence obtained by the other auditors in terms of their reports referred to in the OtherMatters section below is sufficient and appropriate to provide a basis for our auditopinion on the consolidated financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the consolidated financial statements of the current period.These matters were addressed in the context of our audit of the consolidated financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Sr. No. Key Audit Matter ||Auditor's Response |
|1 Accounting for fixed price contracts: ||We performed the following audit procedures: |
| assessed the appropriateness of the accounting policy for recognizing revenue on fixed price contracts with the requirements of Ind AS 115. |
|Estimate of cost is a critical estimate to determine revenues from fixed price contracts and liability for onerous obligations. This estimate |
| evaluated the design and implementation of internal controls over recording of actual cost till date and estimation of total cost required to complete the performance obligations. |
|has an inherent uncertainty as it requires measurement of the || tested the operating effectiveness of the said internal controls for a selected sample of contracts. |
|progress of contracts which is based on cost till date and total cost required to complete the contract || verified the Company's measurement of the actual cost till date and the total estimated cost for completion of performance obligations. |
|performance obligations. (Refer Note 15 23 27 and 52) || performed substantive tests on a sample of contracts to identify if any significant variations in actual costs till date and total costs required to complete the performance obligations and verified whether the revenue was recognised based on such costs after considering the effects of variations if any in the total costs required to complete the performance obligations. |
| || identified onerous contracts to record a provision for expected costs to be incurred till completion of the contract. |
|2 Assessment of the carrying value of trade receivables and contract assets: ||We performed the following audit procedures: |
| evaluated the design and implementation of internal controls over the review of valuation of trade receivables and contract assets. |
|The appropriate valuation of certain trade receivables and contract assets is dependent on a number of factors such as age credit worthiness and ability of counterparties to make payment. (Refer Note 12 and 15) || tested the operating effectiveness of the said internal controls for selected samples. |
| scrutinised a sample of receivable accounts to confirm management's assessment about recoverability of the receivables having regards to credit worthiness of the counterparties to make payment based on passage of time and/or information available with management. |
| verified of subsequent receipts for select samples post balance sheet date. |
| verified the management estimates for provision of expected credit loss in terms of Ind AS 109 on Financial Instruments. |
|3 Physical verification of Inventories: ||We performed following alternate procedures to audit the existence of inventories as at the year-end since we were not able to physically observe the stock verification: |
|The Company's management conducts physical verification of inventories during the year at reasonable intervals however on account of the COVID-19 related lockdown restrictions management was able to perform year end physical verification of inventories only at certain locations. Management has carried out other procedures to validate the existence of its inventory as at the year end such as obtaining confirmations from third party warehouses and carrying out consumption analysis and stock movement analysis. (Refer Note 11) |
| evaluated the design and implementation of the controls over physical verification of inventories and tested the operating effectiveness of the controls during the year. |
| for stocks at third party warehouses obtained direct confirmations and as appropriate performed roll-back procedures to tally with stock quantities at year end on a sample basis. |
| observed the physical verification of inventories carried out by management at certain locations subsequent to year end through virtual mediums and performed roll back procedures evidencing the movement in stocks from the date of such verification to the year end on a sample basis. |
| verified the analytical reviews performed by the management such as consumption analysis and stock movement analysis for the year for raw material and finished goods at factories on a sample basis. |
Information Other than the Financial Statements and Auditor's Report Thereon
The Parent's Board of Directors is responsible for the other information. Theother information comprises the information included in the Integrated Report Board'sReport Management Discussion and Analysis Business Responsibility Report and theDynamics of Blue Star's Growth (herein after referred to as "otherinformation") but does not include the consolidated financial statements standalonefinancial statements and our auditor's report thereon.
Our opinion on the consolidated 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 consolidated financial statements ourresponsibility is to read the other information compare with the financial statements ofsubsidiary and a joint venture audited by the other auditors to the extent it relates tothese entities and in doing so place reliance on the work of the other auditors andconsider whether the other information is materially inconsistent with the consolidatedfinancial statements or our knowledge obtained during the course of our audit or otherwiseappears to be materially misstated. Other information so far as it relates to thesubsidiary and joint venture is traced from their financial statements audited by theother auditors.
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.
Management's Responsibility for the Consolidated Financial Statements
The Parent's Board of Directors is responsible for the matters stated in section 134(5)of the Act with respect to the preparation of these consolidated financial statements thatgive a true and fair view of the consolidated financial position consolidated financialperformance including other comprehensive income consolidated cash flows and consolidatedchanges in equity of the Group including its joint venture in accordance with the Ind ASand other accounting principles generally accepted in India. The respective Board ofDirectors of the companies included in the Group and of its joint venture are responsiblefor maintenance of adequate accounting records in accordance with the provisions of theAct for safeguarding the assets of the Group and its joint venture and for preventing anddetecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror which have been used for the purpose of preparation of the consolidated financialstatements by the Directors of the Parent as aforesaid.
In preparing the consolidated financial statements the respective Board of Directorsof the companies included in the Group and of its joint venture are responsible forassessing the ability of the respective entities to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the respective Board of Directors either intends to liquidatetheir respective entities or to cease operations or has no realistic alternative but todo so.
The respective Board of Directors of the companies included in the Group and of itsjoint venture are also responsible for overseeing the financial reporting process of theGroup and of its joint venture.
Auditor's Responsibility for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidatedfinancial 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 consolidated 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 consolidatedfinancial 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 financial control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theParent has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by the 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 ability ofthe Group and its joint venture to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor's report tothe related disclosures in the consolidated financial statements or if such disclosuresare inadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Group and its joint venture to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the consolidatedfinancial statements including the disclosures and whether the consolidated financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Obtain sufficient appropriate audit evidence regarding the financial informationor business activities within the Group and its joint venture to express an opinion on theconsolidated financial statements. We are responsible for the direction supervision andperformance of the audit of the financial statements of such entities or businessactivities included in the consolidated financial statements of which we are theindependent auditors. For the other entities or business activities included in theconsolidated financial statements which have been audited by the other auditors suchother auditors remain responsible for the direction supervision and performance of theaudits carried out by them. We remain solely responsible for our audit opinion.
Materiality is the magnitude of misstatements in the consolidated financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the consolidated financial statements may be influenced.We consider quantitative materiality and qualitative factors in (i) planning the scope ofour audit work and in evaluating the results of our work; and (ii) to evaluate the effectof any identified misstatements in the consolidated financial statements.
We communicate with those charged with governance of the Parent and such other entitiesincluded in the consolidated financial statements of which we are the independent auditorsregarding among other matters the planned scope and timing of the audit and significantaudit findings including any significant deficiencies in internal control that weidentify 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 consolidated financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
We did not audit the financial statements of a subsidiary whose financial statementsreflect total assets of Rs 140.63 crores as at March 312020 total revenues of Rs 253.56crores and net cash inflows amounting to Rs 2.11 crores for the year ended on that dateas considered in the consolidated financial statements. The consolidated financialstatements also include the Group's share of net profit of Rs 2.73 crores for the yearended March 312020 as considered in the consolidated financial statements in respect ofa joint venture whose financial statements have not been audited by us. These financialstatements have been audited by other auditors whose reports have been furnished to us bythe Management and our opinion on the consolidated financial statements in so far as itrelates to the amounts and disclosures included in respect of this subsidiary and a jointventure and our report in terms of subsection (3) of Section 143 of the Act in so far asit relates to the aforesaid subsidiary and a joint venture is based solely on the reportsof the other auditors.
Our opinion on the consolidated financial statements above and our report on OtherLegal and Regulatory Requirements below is not modified in respect of the above matterwith respect to our reliance on the work done and the reports of the other auditors.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act based on our audit and on theconsideration of the reports of the other auditors on the separate financial statements ofthe subsidiary and joint venture referred to in the Other Matters section above we reportto the extent applicable 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 of the aforesaidconsolidated financial statements.
b) In our opinion proper books of account as required by law relating to preparationof the aforesaid consolidated financial statements have been kept so far as it appearsfrom our examination of those books and the reports of the other auditors.
c) The Consolidated Balance Sheet the Consolidated Statement of Profit and Lossincluding Other Comprehensive Income the Consolidated Cash Flow Statement and theConsolidated Statement of Changes in Equity dealt with by this Report are in agreementwith the relevant books of account maintained for the purpose of preparation of theconsolidated financial statements.
d) In our opinion the aforesaid consolidated financial statements comply with the IndAS specified under Section 133 of the Act.
e) On the basis of the written representations received from the directors of theParent as on March 312020 taken on record by the Board of Directors of the Company andthe reports of the statutory auditors of its subsidiary company incorporated in Indianone of the directors of the Group companies incorporated in India is disqualified as onMarch 312020 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 over financialreporting and the operating effectiveness of such controls refer to our separate Reportin "Annexure A" which is based on the auditors' reports of the Parent and asubsidiary company incorporated in India. Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of internal financial controls over financialreporting of those companies.
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended
In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Parent to its directors during the year is inaccordance with the provisions of section 197 of 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 2014as amended inour opinion and to the best of our information and according to the explanations given tous:
i) The consolidated financial statements disclose the impact of pending litigations onthe consolidated financial position of the Group and its joint venture.
ii) Provision has been made in the consolidated financial statements as required underthe applicable law or accounting standards for material foreseeable losses if any onlong-term contracts including derivative contracts.
iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Parent.
| ||For Deloitte Haskins and Sells LLP |
| ||Chartered Accountants |
| ||(Firm's Registration No. 117366W/W-100018) |
| ||Porus Pardiwalla |
| ||Partner |
| ||(Membership No. 40005) |
| ||(UDIN No: 20040005AAAAAG3631) |
|Place : Mumbai || |
|Date : May 12 2020 || |
Annexure "A" to the Independent Auditor's Report
(Referred to in paragraph 1(f) under 'Report on Other Legal and RegulatoryRequirements' section of our report of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 (the "Act")
In conjunction with our audit of the consolidated Ind AS financial statements of theCompany as of and for the year ended March 312020 we have audited the internal financialcontrols over financial reporting of Blue Star Limited (hereinafter referred to asthe"Parent") and its subsidiary company which includes internal financialcontrols over financial reporting of the Company's subsidiary company incorporated inIndia as of that date.
Management's Responsibility for Internal Financial Controls
The respective Board of Directors of the Parent its subsidiary company incorporated inIndia are responsible for establishing and maintaining internal financial controls basedon the internal control over financial reporting criteria established by the respectiveCompanies considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India (ICAI). These responsibilities include thedesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the respective company's policies the safeguarding of its assetsthe prevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.
Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Parent its subsidiary company incorporated in India based onour audit. We conducted our audit in accordance with the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting (the "Guidance Note")issued by the Institute of Chartered Accountants of India and the Standards on Auditingprescribed under Section 143(10) of the Companies Act 2013 to the extent applicable toan audit of internal financial controls. Those Standards and the Guidance Note requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting was established and maintained and if such controls operated effectively in allmaterial respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due 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 system overfinancial reporting of the Parent and its subsidiary company which are companiesincorporated in India.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us the Parent and its subsidiary company which are companies incorporated in Indiahave in all material respects an adequate internal financial controls system overfinancial reporting and such internal financial controls over financial reporting wereoperating effectively as at March 312020 based on the criteria for internal financialcontrol over financial reporting established by the respective companies considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
| ||For Deloitte Haskins and Sells LLP |
| ||Chartered Accountants |
| ||(Firm's Registration No. 117366W/W-100018) |
| ||Porus Pardiwalla |
| ||Partner |
| ||(Membership No. 40005) |
| ||(UDIN No: 20040005AAAAAG3631) |
|Place : Mumbai || |
|Date : May 12 2020 || |