The Members of
Coffee Day Enterprises Limited
REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
We have audited the standalone financial statements of Coffee Day EnterprisesLimited ("the Company") which comprise the standalone balance sheet as atMarch 31 2019 and the standalone statement of profit and loss (including othercomprehensive income) standalone statement of changes in equity and standalone statementof cash flows for the year then ended and notes to the standalone financial statementsincluding a summary of the significant accounting policies and other explanatoryinformation.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2019 and loss and other comprehensiveincome 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) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance withthe Code of Ethics issued by the Institute of Chartered Accountants of India together withthe ethical requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the Rules thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that in our professional judgment were of mostsignificance 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 financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.
|The key audit matter ||How the matter was addressed in our audit |
|Impairment of investments ||In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:- |
|As at March 31 2019 the Company has investment in Coffee Day Hotels and Resorts Private Limited (CDHRPL) amounting to Rs.706.68 million. || |
|As CDHRPL has reported losses in the current and prior financial years Management has assessed that there is an indication that the asset may be impaired and hence has estimated its recoverable amount and basis such estimation has concluded that there is no impairment required to be recorded. || evaluated the design and implementation of the processes and internal controls relating to identification / assessment of impairment indicators and performing the related impairment analysis; |
| || evaluated management's identification of CGU's the carrying value of each CGU and the methodology followed by management for the impairment assessment in compliance with the prevailing accounting standards; |
|We focused on this area due to the magnitude of the carrying amounts of these assets and the fact that significant judgements were required by management (i) to identify whether any impairment indicators existed; (ii) to determine the appropriate impairment approaches i.e. fair value less costs of disposal or value in use; and (iii) to select key assumptions to be adopted in the valuation models including estimating future cash flows growth rates and discount rates. || evaluated the valuation approach and assumptions used by the independent valuation expert appointed by the Management. This involved assessing the competence expertise and objectivity of the independent valuer including obtaining an understanding of the independent valuer's scope of work and terms of engagement. We have also evaluated the appropriateness of the assumptions applied to key inputs such as market rates for land and replacement cost of building which involved comparing these inputs with externally derived data as well as our own assessments based on our knowledge of the client. This also involved using our internal valuation specialists to compare these assumptions against external benchmarks and considering the assumptions based on our knowledge of the client and its market. |
| || Performed sensitivity analysis by assessing the impact of changes in key inputs on the fair value estimated. |
| || evaluated the appropriateness of the disclosure in the financial statements and assessed the completeness and mathematical accuracy. |
|Assets held for sale ||In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence. |
|On February 07 2019 the Board of Directors of the Company provided an in-principle approval to sell the investment in equity shares of Mindtree Limited ('the shares') held by the Group and Mr. V. G. Siddhartha Chairman and Managing Director of the Group. Subsequently on 18 March 2019 the consent of the Board of Directors was accorded to sell the shares at an agreed price of INR 980 per share along with such other terms and conditions as per the draft share-purchase agreement || We independently read the share purchase agreement entered into between the Group and the purchaser and assessed the key conditions precedent for consummation of the sale transaction as documented in the agreement. |
|to be entered between the Group and Larsen & Toubro Limited ('purchaser). On 18 March 2019 a share purchase agreement was entered among the Group and Larsen & Toubro Ltd for sale of the shares subject to approval of a regulator and certain other routine terms and conditions. || Evaluating the criteria required under Ind AS 105 for classification of a non-current asset as held for sale and an independent assessment of Management's evaluation of how each of such criteria is met. |
| || Evaluated Management's specific assessment of why they believe that the approval from the regulator is probable as at March 31 2019 and also reviewed the independent external legal opinion obtained by Management to validate such a conclusion. |
|As at March 31 2019 though the consummation of the sale of the shares was not completed pending approval from the regulator Management has classified the investment in shares of Mindtree as "Non currents assets held for sale" as it believes that the necessary criteria for such classification as required under Ind-AS 105 - Non-current Assets Held for Sale and Discontinued Operations have been met. || We have validated the appropriateness of the related disclosures in note 29 to the financial statements. |
|We focused on this area as there is uncertainty as to the likely outcome of the regulatory approval and involves significant management's judgement on the classification as such asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. || |
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditors' reportthereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
MANAGEMENT'S RESPONSIBILITY FOR THE STANDALONE FINANCIAL STATEMENTS
The Company's management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit/loss and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. 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 designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the standalone financial statements that give atrue and fair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
Board of Directors is also responsible for overseeing the Company's financial reportingprocess.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the standalonefinancial 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 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 standalonefinancial 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 with reference to financial statements in place andthe operating effectiveness of such 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 financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
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 financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors' report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by the Companies (Auditors' Report)
Order 2016 ("the Order") issued by the Central Government in terms ofsection 143 (11) of the Act we give in the "Annexure A" a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.
(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 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 standalone balance sheet the standalone statement of profit and loss (includingother comprehensive income) the standalone statement of changes in equity and thestandalone statement of cash flows dealt with by this Report are in agreement with thebooks of account.
d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under section 133 of the Act.
e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164(2) of theAct.
f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B".
(B) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations as at March 31 2019 onits financial position in its standalone financial statements - Refer Note 27 to thestandalone 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.
iv. The disclosures in the standalone financial statements regarding holdings as wellas dealings in specified bank notes during the period from November 08 2016 to December30 2016 have not been made in these financial statements since they do not pertain to thefinancial year ended March 31 2019.
(C) With respect to the matter to be included in the Auditors' Report under section197(16):
In our opinion and according to the information and explanations given to us theCompany has not paid any remuneration to its directors during the current year inaccordance with the provisions of Section 197 of the Act. The Ministry of CorporateAffairs has not prescribed other details under Section 197(16) which are required to becommented upon by us.
for B S R & Associates LLP
Firm registration number: 116231W/W-100024
Membership No.: 217433
Date: May 24 2019
Annexure A to the Independent Auditor's Report
As referred to in our Independent Auditor's Report to the members of Coffee DayEnterprises Limited (the Company') on the Standalone Ind AS financial statements ofthe Company for the year ended March 31 2019 we report that:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified every year. In our opinion the periodicity of physicalverification is reasonable having regard to the size of the Company and the nature of itsassets. In accordance with the programme physical verification of fixed assets wascarried out during the year and no material discrepancies were noted.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records the Company does not have any immovable properties except fora parcel of land held on long term lease. We have verified the lease agreement in the nameof the Company for the land taken on lease duly registered with the appropriate authority.
(ii) According to the information and explanations given to us and on the basis of ourexamination of the records the inventories of coffee beans have been physically verifiedby the Management during the year. In our opinion the frequency of verification isreasonable.
The discrepancies identified on physical verification of inventories between physicalstocks and book records were not material. However there is no physical inventory as atthe year end.
(iii) According to the information and explanations given to us and on the basis of ourexamination of the records the Company has granted unsecured loans to three wholly ownedsubsidiary Companies covered in the register maintained under Section 189 of the Act and;
(a) In our opinion the rate of interest and other terms and conditions on which loanshad been granted to the wholly owned subsidiaries listed in the register maintained underSection 189 of the Act were not prima facie prejudicial to the interest of the Company.
(b) In case of loans granted to the wholly owned subsidiaries listed in the registermaintained under Section 189 of the Act the loans and interest are repayable on demand.
(c) There are no overdue amounts in respect of the loan granted to the wholly ownedsubsidiaries listed in the register maintained under section 189 of the Act.
(iv) In our opinion and according to the information and explanation given to us theCompany has complied with the provisions of Section 185 and 186 of the Act with respect toloans advanced and investments made and securities and guarantees given.
(v) The Company has not accepted any deposits from the public.
(vi) According to the information and explanation given to us the Central Governmentof India has not prescribed the maintenance of cost records under Section 148(1) of theAct for any of the services rendered and goods sold by the Company.
(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including Provident Fund Income tax duesGoods and Service tax and other material statutory dues have generally been regularlydeposited during the year by the Company with the appropriate authorities.
As explained to us the Company did not have any dues on account of Employees' StateInsurance Duty of Customs and Cess during the year.
Also refer note 27 to the financial statements.
According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Goods and Service tax Income tax dues and othermaterial statutory dues were in arrears as at March 31 2019 for a period of more thansix months from the date they became payable.
(b) According to the information and explanations given to us there are no dues ofGoods and Service tax and other material statutory dues which have not been deposited withthe appropriate authorities on account of any dispute. As explained to us the Company didnot have any dues on account of Employees' State Insurance
Duty of Customs and Cess during the year. The Company however disputes the followingIncome-tax dues which are as follows:
|Name of the Statute ||Nature of the dues ||Amount (Rs. in million) ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Tax and interest ||46.37 ||AY 2011 - 12 ||Income Tax Appellate |
| || ||(6.20)* || ||Tribunal Bangalore |
* Amount in parenthesis represents taxes paid under protest
(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of dues to its bankers and debenture holders.The Company did not have any outstanding dues to any financial institution and governmentduring the year.
(ix) According to the information and explanations given to us and on the basis of ourexamination of the records the Company did not raise any money by way of initial publicoffer or further public offer (including debt instruments) during the year. In our opinionand according to the information and explanations given to us the term loans taken by theCompany were applied for the purposes for which they were raised.
(x) According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe year.
(xi) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company the Company has not paid any ManagerialRemuneration during the year. Accordingly paragraph 3(xi) of this Order is notapplicable.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is notapplicable.
(xiii) In our opinion and according to the information and explanations given to usand based on an examination of the records of the Company all transactions with therelated parties are in compliance with sections 177 and 188 of Companies Act 2013 whereapplicable and the details have been disclosed in the financial statements as required bythe applicable accounting standards.
(xiv) According to the information and explanations given to us the Company has notmade any preferential allotment or private placement of shares or convertible debenturesduring the year. Accordingly paragraph 3(xiv) of the Order is not applicable.
(xv) According to the information and explanations given to us the Company has notentered into any non-cash transaction with directors or person connected with him asreferred to in Section 192 of Companies Act 2013. Accordingly paragraph 3(xv) of theOrder is not applicable.
(xvi) In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934.
for B S R & Associates LLP
Firm registration number: 116231W/W-100024
Membership No.: 217433
Date: May 24 2019
Annexure B to the Independent Auditors' report on the standalone financial statementsof Coffee Day Enterprises Limited For the year ended March 31 2019
Report on the internal financial controls with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013
We have audited the internal financial controls with reference to financial statementsof Coffee Day Enterprises Limited ("the Company") as of March 31 2019 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at March 31 2019 based on the internal financial controls withreference to financial statements criteria established by the Company 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 (the "Guidance Note").
MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS
The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013 (hereinafter referred to as"the Act").
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing prescribed undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. 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 with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of such internal financial controlsassessing 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 judgment including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to financial statements.
MEANING OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS
A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements include those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.
INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIALSTATEMENTS
Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
for B S R & Associates LLP
Firm registration number: 116231W/W-100024
Membership No.: 217433
Date: May 24 2019