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Coffee Day Enterprises Ltd.

BSE: 539436 Sector: Services
NSE: COFFEEDAY ISIN Code: INE335K01011
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VOLUME 292904
52-Week high 86.70
52-Week low 36.80
P/E 34.45
Mkt Cap.(Rs cr) 1,121
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 54.50
CLOSE 54.35
VOLUME 292904
52-Week high 86.70
52-Week low 36.80
P/E 34.45
Mkt Cap.(Rs cr) 1,121
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Coffee Day Enterprises Ltd. (COFFEEDAY) - Director Report

Company director report

Dear Members

Your Directors have pleasure in presenting their 14th AnnualReport on business and operations along with the Audited financial statements and theAuditor?s report of the Company for the financial year ended 31st March2022.

Financial Highlights:

Particulars Coffee Day Enterprises Limited Coffee Day Enterprises Limited Coffee Day Global Limited Coffee Day Global Limited
(Consolidated) (Consolidated) (Consolidated) (Consolidated)
FY 22 FY 21 FY 22 FY 21
Net Operational Revenue 582 853 496 401
Finance charges 53 261 34 128
Depreciation 148 400 143 333
Profit Before Tax (128) (798) (111) (450)
Income Tax 3 (167) - (155)
Total Profit/ (Loss) attributable to the Owners of the Company. (121) (584) (113) (306)

Performance Overview

During the fiscal year ended 31st March 2022 Net revenues decreased by32% to Rs.582 Crores in FY 2021-22 compared with Rs.853 Crores reported in FY2020-21(which includes Revenues of Rs.387 crores of Sical Logistics Limited for 9 monthsperiod prior to NCLT process). Since Sical Logistics revenues don?t form part of FY21-22 Financials on apple to apple comparison basis (excluding Sical Logistics) therevenues has increased by 24.8%.

Consolidated net loss for the year under review attributable toshareholders of the company stood at Rs. 121 Crores compared with loss of Rs.584 Crores inthe previous financial year. The reduction in loss is encouraging for the future of yourcompany.

State of The Company?s Affairs

The state of the Company affairs forms an integral part of ManagementDiscussion & Analysis Report.

Dividend

The Board of Directors of the Company has not recommended any dividendfor the financial year 2021-22.

Transfer to Reserves:

In accordance to the provisions of Section 134(3)(j) of the CompaniesAct 2013 (hereinafter "the Act") the Company has not proposed any amount totransfer to the General reserves of the Company for the financial year 2021-22.

Deposits:

The Company has not accepted any Deposits under Section 73 and ChapterV of the Act and the rules made thereunder.

Particulars of Loans Guarantees or Investments:

The details of the loans guarantees and investments are provided inthe notes to the audited financial statements annexed with the Annual report.

Subsidiaries Joint Ventures and Associate Companies:

As on 31st March 2022 the Company has 20 subsidiaries (includingindirect subsidiaries) 1 Associate Companies and 3 Joint Ventures. The details of theCompanies which are yet to commence operations and which have been liquidated or soldduring the year are mentioned in "Form AOC-1" which is attached as an"Annexure VIIL" A statement containing the salient features of the financialstatements of Subsidiaries Associate Companies or Joint Ventures are mentionedspecifically in the same annexure as mentioned above. In accordance with Section 136(1) ofthe Act the financial statements of the subsidiaries companies are available on theCompany?s official website post approval of the members.

In line with Regulation 24 and Regulation 46(2)(h) of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 (hereinafter "the ListingRegulations") the Company has formulated a detailed policy for determining‘material? subsidiaries and the said policy is available at the Company?sofficial website and may be accessed at the link:http://www.coffeeday.com/PDF/MATERIAL-SUBSIDIARIES.pdf

Management Discussion & Analysis Report:

As stated in Regulation 34(2)(e) of the Listing Regulations the AnnualReport shall contain a detailed report on Management Discussion & Analysis which ishereto attached with the Annual report in "Annexure-I."

Corporate Governance:

The report on Corporate Governance along with a Certificate from thePracticing Company Secretary regarding proper compliance of Corporate Governance pursuantto the requirements of Schedule V of the Listing Regulations forms an integral part of theAnnual Report stated in "Annexure-II."

Dividend Distribution Policy:

In accordance with Regulation 43A of the SEBI (Listing Obligations andDisclosure Requirements) (Second Amendment) Regulations 2016 the Board of the Companyhas adopted Dividend Distribution policy in their meeting held on 18th May 2017 whichaims at marking the right balance between the quantum of dividend paid to its shareholdersand the amount of profit retained for its commercial requirements. The said policy ishoisted in the website of the company."

Board Diversity:

The Company recognizes and embraces the importance of diverse Board inits success. We believe that a truly diverse board will leverage differences in thoughtperspective knowledge industry experience that will help us retain our competitivestrength. The Company has evaluated the policy with a purpose to ensure adequate diversityin Board of Directors which enables them to function efficiently and fosterdifferentiated thought processes at the back of varied industrial and managementexpertise. The Board recognises the importance of a diverse composition and has thereforeadopted a Board Diversity Policy. The policy is made available at the Company?sofficial website via

link:https://www.coffeeday.com/PDF/BOARD%20DIVERSITY%20POLICY.pdf

Board Evaluation and Policy on Directors? Appointment andRemuneration:

In accordance with Section 178(3) of the Companies Act 2013 theNomination and Remuneration Committee has specified the criteria and manner for effectiveevaluation of performance of ‘Board? its ‘Committees? and‘Individual Directors? carried out either by the Board by the Nomination andRemuneration Committee or by an independent external agency and reviewed itsimplementation and compliance.

The detailed policy in compliance with Section 178(3) of the Act readalong with Regulation 19 of the Listing Regulations has been approved by the Board ofDirectors of the Company and is made accessible at the Company?s official website atthe following link:

https://www.coffeedav.com/PDF/NOMINATION%20&%20REMUNERATION%2QPOLICY.pdf

Appointment/ Resignation/ Re-appointment of Board of Directors:

• During the year under report Dr. Albert Hieronimus who was anIndependent Director of the Company resigned from his post on 30th June 2021due to the ongoing pandemic COVID-19 and personal health restrictions. However theCompany on 12th November 2021 appointed Dr. I. R. Ravish to the Board as anAdditional Non-Executive Director of the Company. However the approval from members issought in this Annual General Meeting for regularization Dr. I. R. Ravish.

• None of the Directors of the Company as on 31st March 2022 areeligible to retire by rotation. Significant Development during the Year

Post the unfortunate demise of Chairman Shri V G Siddhartha theCompany appointed Mr. Ashok Kumar Malhotra Ex-DIG CBI assisted by Dr. M. R. Venkatesh asenior partner of M/s. Agastya Legal LLP New Delhi to scrutinize the books of accounts ofthe Company and its six Subsidiaries and one joint venture. The Investigators submittedtheir investigation report on 24th July 2020 it reported that as on 31stJuly 2019 Rs 3535 Crores is due from Mysore Amalgamated Coffee Estates Limited (MACEL)to the six subsidiaries and one Joint Venture of the company. Thereafter the Boardappointed Justice. K.L. Manjunath retired Judge of Hon. High Court of Karnataka tosuggest and oversee actions for recovery of the dues from MACEL and to help on any otherassociated matters. However due to untimely demise of Mr. K L. Manjunath the Boardappointed Mr. Justice H N Nagamohandas a retired Hon. Judge of High Court of Karnataka inplace of Late K.L. Manjunath and requested him to expeditiously submit the Report. TheReport is awaited.

The Board of the Company appointed Mr. Justice H N Nagamohandas aretired Hon?ble Judge of High-Court of Karnataka and requested him to expeditiouslysubmit the Report. The Report is awaited

The day to day operations of the Company are being managed by the CEOand whole time director and professional team with the help of the Board members to ensureprotection of interest of all stakeholders viz shareholders lenders vendors employeesetc. The debt levels have reduced significantly from Rs.7214 as on 31 March 2019 toRs.1898 crores as at the end of 31 March 2021 and to Rs.1810 crores as at the end on 31March 2022.

Director?s Responsibility Statement:

In Compliance with section 134(5) of the Companies Act 2013 the Boardof Directors hereby confirms the following:

• In the preparation of the annual accounts the applicableaccounting standards had been followed along with proper explanation relating to materialdepartures;

• The Directors had selected such accounting policies and appliedthem consistently and made judgments and estimates that are reasonable and prudent so asto give a true and fair view of the state of affairs of the company at the end of thefinancial year and of the profit and loss of the company for that period;

• The Directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of this Actfor safeguarding the assets of the company and for preventing and detecting fraud andother irregularities;

• The Directors had prepared the annual accounts on a goingconcern basis; and

• The Directors are responsible for establishing and maintainadequate and effective internal financial controls with regard to it business operationsand in the preparation and presentation of the financial statements in particular theassertions on the internal financial controls in accordance with broader criteriaestablished by the Company. Towards the above objective the directors have laid down theinternal controls based on the internal controls framework established by the Companywhich in all material respects were operating effectively as at March 31 2022.

• The Directors had devised proper systems to ensure compliancewith the provisions of all applicable laws and that such systems were adequate. TheCompany has substantially complied with material provisions of such acts and regulationsas are relevant for its operations.

Declaration by Independent Directors:

All the Independent Directors have given their declarations statingthat they meet the criteria of independence as laid down under Section 149(6) of the Actread with Regulation 16(1)(b) of the Listing Regulations. In the opinion of the Boardthey fulfil the conditions of independence as specified in the Act and the ListingRegulations and are independent of the management.

Committees of the Board:

The Company has four main Committees of the Board i.e.:

(a.) Audit Committee

(b.) Nomination and Remuneration Committee and

(c.) Stakeholder?s Relationship Committee.

(d.) Corporate Social Responsibility.

The detailed information on each of these committees including itscomposition functioning and number of meetings are disclosed in the Corporate Governancereport annexed with the Annual report of the Company.

Meetings of the Board:

During the financial year 2021-22 the meetings of the Board ofDirectors were held five (5) times. Details of these meetings and other Committee/Generalmeetings are given in the report on Corporate Governance Report attached with the Annualreport.

Particulars of Contracts/arrangements with related parties:

Post the unfortunate demise of Chairman Shri V G Siddhartha theCompany appointed Mr. Ashok Kumar Malhotra Ex-DIG CBI assisted by Dr. M. R. Venkatesh asenior partner of M/s. Agastya Legal LLP New Delhi to scrutinize the books of accounts ofthe Company and its six Subsidiaries and one joint venture. The Investigators submittedtheir investigation report on 24th July 2020 it reported that as on 31stJuly 2019 Rs 3535 Crores is due from Mysore Amalgamated Coffee Estates Limited (MACEL)to the six subsidiaries and one Joint Venture of the company. Thereafter the Boardappointed Justice. K.L. Manjunath retired Judge of Hon. High Court of Karnataka tosuggest and oversee actions for recovery of the dues from MACEL and to help on any otherassociated matters. However due to untimely demise of Mr. K L. Manjunath the Boardappointed Mr. Justice H N Nagamohandas a retired Hon. Judge of High Court of Karnataka inplace of Late K.L. Manjunath and requested him to expeditiously submit the Report. TheReport is awaited.

However all the repetitive Related Party Transactions that wereentered into during the FY 2021-22 were on an arm?s length basis and in the ordinarycourse of business. There were no materially significant Related Party Transactions madeby the Company during the year that required shareholders? approval under Regulation23 of the Listing Regulations. Prior omnibus approval from the Audit Committee is obtainedfor transactions which are repetitive in nature. Further disclosures are made to theCommittee on a quarterly basis.

Further Particulars of contracts or arrangements with related partiesreferred to in sub-section (1) of section 188 in the Form AOC-2 have been enclosed asAnnexure-IX pursuant to clause (h) of subsection (3) of Section 134 of Companies Act 2013read with Rule 8(2) of the Companies (Accounts) Rules 2014.

The Company has adopted a Policy for dealing with Related PartyTransactions and is made available on the Company?s official website via web link:https://www.coffeeday.com/PDF/RPT%20POLICY.pdf

Material changes and commitment - if any affecting the financialposition of the Company from the end of the financial year till the date of this Report:

There has been no material change and commitment affecting thefinancial performance of the Company which has occurred from the end of the financial yearof the Company to which the financial statements relate to till the date of this report.

Change in nature of business:

There has been no change in the nature of business of the Company.

Conservation of Energy Research and Development Technologyabsorption Foreign Exchange Earnings & Outgo:

The information on conservation of energy technology absorption andforeign exchange earnings and outgo stipulated under Section 134(3) (m) of the Act readwith Rule 8 of the Companies (Accounts) Rules 2014 is provided in"Annexure-III" to this Annual report.

AUDITORS:

a) Statutory Auditors:

Members of the Company have appointed M/s. Venkatesh & Co.Chartered Accountants as Statutory Auditors of the company for the period of 5 years fromthe Conclusion of 12th Annual General Meeting till the conclusion of 17thAnnual General Meeting which will fall in the year 2025 in their 12th AnnualGeneral Meeting held on 31st December 2020.

b) Secretarial Auditor:

In accordance with Section 204 of the Act and the rules made thereunder the Company has appointed M/s G. Akshay & Associates Practising CompanySecretaries Bangalore to undertake the Secretarial Audit of the Company for the financialyear ended 31st March 2022. The Secretarial Audit report issued in this regard isattached as "Annexure-IV".

c) Cost Auditor:

In terms of the provisions of Section 148 of the Act the appointmentof the Cost Auditors does not apply to the Company.

d) Internal Auditor:

Pursuant to the provisions of Section 138 of the Act read with theCompanies (Accounts) Rules 2014 the Company has appointed M/s A B S & Co. CharteredAccountants as Internal Auditors of the Company.

Significant and material orders passed by the Courts/Regulators:

During the year under report there were no significant and materialorders passed/notices served by Courts/Regulators except the following

1. The Company has received a notice form SEBI for non-compliance ofcertain SOP. The Company opted for settlement and paid as per the prescribed penalty.

2. Non-disclosure of certain pledge and un-pledge of shares of MindtreeLtd under SAST regulations. The Company has opted for adjudication process and filed itsobjection for the notice. The Company is yet to receive further communication in thisregard as on 30th May 2022.

3. The Company on 7th December 2021 received the notice from SEBI forthe transfer of funds of Rs.3535 crores by subsidiaries of the company to MACEL. TheCompany is providing necessary information to SEBI as and when demanded. The decision ofSEBI is awaited.

Extract of Annual Return:

An extract of the Annual return in form MGT-9 in compliance withSection 92 of the Companies Act 2013 read with applicable rules made thereunder isannexed as "Annexure-V" and is placed on the website www.coffeeday.com

Business Responsibility Report:

In compliance with the Regulation 34(2)(f) of the Listing Regulationsthe Business Responsibility Report forms the part of this Annual Report as"Annexure-VI".

Secretarial Standards:

The Company complies with all Secretarial Standards issued by Instituteof Company Secretaries of India. Internal Financial Control (IFC) and its Adequacy:

The Internal Controls of the Company operate through well documentedstandard policies and guidelines. The Company has adequate internal financial controlprocedures commensurate with its size and nature of business which helps in ensuringorderly and efficient conduct of its business. This system provide a reasonable assuranceof financial and operational information complying with applicable statutes safeguardingof assets of the Company prevention and detection of frauds accuracy and completeness ofaccounting records and ensuring compliance with corporate policies.

Exceptions if any are reported under "Explanatory Notes ofManagement" for each financial quarter.

All the significant internal audit observations and management actionsthereon are reported to Audit Committee on a quarterly basis. The Audit Committee reviewsthe operations and assesses the adequacy of the actions proposed as well as monitors theirimplementation. The internal auditors conduct a quarterly follow-up for implementation ofall audit recommendations and the status report is presented to the Audit Committeeregularly.

The Company?s management has assessed the effectiveness of theinternal control over financial reporting for the year ended 31st March 2022 and based onthe assessment; believe that the system is working effectively. The Statutory Auditorshave issued a report on the adequacy and effectiveness of the internal control systemsover financial reporting.

Whistle Blower Policy/Vigil Mechanism:

As per the requirements laid down under Section 177(9) of the Act andRegulation 22 of the Listing Regulations the Company has established the Whistle blowerPolicy which encourages Directors and employees to bring to the Company?s attentioninstances of unethical behaviour actual or suspected incidents of fraud or violation ofthe Company?s Code of Conduct that could adversely impact on Company?soperations and business. The Policy provides that the Company investigates such incidentswhen reported in an impartial manner and takes appropriate action to ensure thatrequisite standards of professional and ethical conduct are always upheld. The practice ofthe Whistle blower Policy is overseen by the Audit Committee and no employee has beendenied access to the Committee.

The Contact details of Chairman of Audit committee as under:

Name: K.R.Mohan

43 New No.22 1st Floor 16th Cross

The Whistle Blower Policy is available on the Company?s officialwebsite and may be accessed through web link: https://coffeeday.com/PDF/WhistleBlower.pdf

Particulars of Employees:

As stated in provisions of Section 197(12) of the Act read with Rule5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 as amended from time to time a statement showing the names and otherparticulars of the employees drawing remuneration in excess of the limits set out in thesaid rules which includes the name of top 10 employees in terms of remuneration formspart of this annual report. Pursuant to the provisions of Section 136(1) of the Act theBoard report is being sent to the shareholders including the said statement.

Disclosure pertaining to the remuneration as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is provided in "Annexure-VII".

Corporate Social Responsibility (CSR):

Pursuant to the provisions of Section 135 of the Act read with theCompanies (Corporate Social Responsibility Policy) Rules 2014 and on the recommendationsof the CSR Committee comprising of Mr. S.V. Ranganath as the Chairman and Mrs. MalavikaHegde and K.R. Mohan as Members the CSR policy is adopted and approved by the Board ofthe Company. The said policy has been hosted on the Company?s website and isavailable on the link: http://www.coffeedav.com/PDF/CSR-Policv-CDEL.pdf It lays down thepurpose of formulation of the policy areas of focus composition of Committee and CSRbudget.

During the year under Report the Company is not required to spend anyamount on CSR activities.

Green Initiatives:

In commitment to keep in line with the Green Initiative and goingbeyond to it electronic copy of the Notice of 14th Annual General Meeting of the Companyare sent to all Members whose email addresses are registered with the Company/DepositoryParticipant(s).

Prohibition and Redressal of Sexual Harassment at Work place:

The Company has zero tolerance for sexual harassment at workplace andhas adopted a Policy on Prevention Prohibition and Redressal of Sexual Harassment atworkplace in line with the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and the rules made thereunder. ThePolicy aims to promote a healthy work environment and to provide protection to employeesat workplace and redress complaints of sexual harassment and related matters thereto. TheCompany has also constituted an Internal Complaints Committee known as the Prevention ofSexual Harassment (POSH) Committee to enquire into complaints of sexual harassment andrecommend appropriate action.

Following are the Internal Complaints Committee members.

1. Ms. Bhavna Halappa - Presiding Officer

2. Ms. Arundhati Mukoo - Internal member

3. Mrs. G. Vanajakshi N - External Member

During the financial year 2021-22 the Company has not received anycomplaints on sexual harassment.

BOARD?S RESPONSE ON AUDITORS? QUALIFICATION RESERVATION ORADVERSE REMARK OR DISCLAIMER MADE:

A. Audit Qualification

I. Following are the Disclaimers/Emphasis of matter/qualificationsgiven in the CONSOLIDATED INDEPENDENT AUDITORS REPORT for the quarter/year ended 31stMarch 2022 and management response for the same.

1. It is observed that there has been a change in the percentage ofshares held by the Parent Company in two of its subsidiaries as of March 31 2022vis-a-vis March 31 2019 due to the invocation of shares by the lenders of thesubsidiaries. However while considering the amount invested in the subsidiaries theManagement of the Company has considered the erstwhile shareholding pattern prior todilution as the Management believes that the change in shareholding is temporary in natureand the shares pledged will be redeemed back by the Company (refer to Note 63 of theConsolidated Financial Statements). However these shares have been transferred to suchlenders before March 31 2022. We have been informed that the lenders have not sold any ofthe shares invoked and consequently have not made any adjustments to the loan outstanding.Accordingly the Management believes that it is not possible to attribute any sale valueto the invoked shares. Consequently the impact of the said transfer on the book value ofinvoked shares of INR 156 Crores on the standalone financial statements cannot beascertained.

Further the impact of the aforesaid on this Statement including butnot limited to the profit attributable to the non-controlling interest in the Companycannot be ascertained. Accordingly the level of compliance to the requirements of theIndian Accounting Standards cannot be ascertained by us.

Reply: Management believes that the change in shareholding is temporaryin nature and the shares pledged will be released back to the Company. Since there is nomarketability for the shares invoked management is unable to estimate the impact.

2. In a letter dated July 27 2019 signed by late Mr. V. G. Siddharthathe Promoter and then Chairman and Managing Director of the Parent Company which has cometo light it was inter-alia stated that the Management and auditors were unaware of allhis transactions. Attention is drawn to Note 59 of the Consolidated Financial Statementswherein consequently the Board of Directors have initiated an investigation into thecircumstances leading to the statements made in the letter and to scrutinize the books ofaccounts of the Company and its subsidiaries. The investigation report submitted on July24 2020 has concluded that a sum of INR 3535 Crore is due from MACEL a related entity tothe subsidiaries of CDEL as on July 31 2019. The report further concludes that out ofthis sum INR 842 Crore was due to the subsidiaries as on March 31 2019 and the balancesum of INR 2693 Crore is the incremental outstanding which needs to be addressed.Further the Board of the Company in the board meeting on August 21 2020 appointedRetired Hon?ble Justice Sri K L Manjunath former Judge of Hon?ble High Court ofKarnataka to suggest and oversee actions for recovery of the dues from MACEL and to helpon any other associated matters.

Due to the demise of Sri K. L. Manjunath the Board in their meetingheld on February 7 2022 appointed Hon'ble Mr. Justice H N Nagamohandas a retired Judgeof High Court of Karnataka to suggest and oversee actions for recovery of the dues fromMACEL and to help on any other associated matters. The future course of action will bedecided by the Management based on the decision taken by the Hon?ble Justice Sri H NNagamohandas. We are unable to comment on the appropriateness of the transactionsincluding regulatory non-compliances if any and the recoverability of the amounts due inthe absence of requisite evidence not being made available to us and its impact to theStatement.

Further the Auditors of 1 subsidiary which in turn has 3 step-downsubsidiaries and 2 joint ventures along with the auditors of 3 subsidiaries and 2step-down subsidiaries based on their review have issued a disclaimer of conclusion dueto the possible impact of the recoverability of dues from MACEL.

Reply: The Company vide its letter dated 21.08.2020 has made aDisclosure under Regulation 30 of SEBI (LODR) Regulations 2015 to the National StockExchange of India Ltd and Bombay Stock Exchange Limited that the company has appointedRetired Hon?ble Justice Sri.K.L.Manjunath former Judge of Hon?ble High Court ofKarnataka to suggest and oversee actions for recovery of dues from Mysore AmalgamatedCoffee Estates Ltd. Due to the untimely demise Retired Hon?ble JusticeSri.K.L.Manjunat the Board of the Company appointed Retired High-Court JudgeNagamohandas As on 31.03.2022 the amount due by MACEL to various subsidiaries and jointventure of the company amounts Rs.3430 crores.

3. In respect of parent company and some of the subsidiaries attentionis drawn to Notes 23A of the Consolidated Financial Statements wherein instances ofnon-compliance with certain debt covenants including interest & principal repaymentdefaults have been described. We also draw attention to the fact that the Company has notobtained the balance confirmations on loans from lenders. In the absence of adequate andsufficient audit evidence to establish the amounts payable to the lenders we are unableto provide our opinion on the correctness of these amounts reflected in the statement andalso on their consequential impact including potential tax liabilities. We have beeninformed that during the year certain lenders have exercised their right to recall theloan and some lenders have initiated legal action to recover dues. However in the absenceof the adequate evidence we are unable to comment on the consequential adjustments thatmight impact this Statement on account of non-compliance with debt covenants.

Further in view of the loan recall notices legal disputes and pendingone-time settlement with the lenders of the group the parent company three subsidiariesand one step down subsidiary has not recognised interest on the loans outstanding as ofMarch 31 2022 aggregated to INR 185.51 Crores. As the loan recall letters provided by thelenders requires payment of interest penal interest non-provision of such interest isnot in line with the accrual concept of accounting.

Further the Auditors of parent company 1 subsidiary and 1 step downsubsidiary have issued a disclaimer of opinion due to non-provision of interest and theauditors of 2 subsidiaries have emphasised in their reports (Refer Note 23A of theConsolidated Financial Statements). Reliance is placed on the books of accounts providedby the Management

Reply: The Group has borrowings amounting to Rs. 1810 crores as at 31March 2022. There have been certain covenant breaches with respect to certain borrowingstaken by the group from various lenders. Such breaches entitle the lenders to recall theloan. On the date of this statement there have been certain defaults in repayments ofprincipal and interest of the loans and certain lenders have exercised their rightsincluding recall the loans.

4. The Group has Goodwill of INR 368 Crores arising on consolidation(Refer Note 6 of the Consolidated Financial statements). In view of the developmentsduring the period including the investigation report submitted to the company. The lastdrawn valuation report provided to us by the Company was dated March 31 2019 the Groupis required to assess the said asset for impairment as required by Ind AS 36‘Impairment of Assets?. However the same is pending as of March 31 2022. Inthe absence of a valuation report we are unable to comment on whether any provisions onaccount of impairment is required and the consequential impact of the same on thisstatement

Reply: The assessment of impairment if any remains to be done.

5. Auditors of 2 subsidiaries and 1 step down subsidiary have issued adisclaimer of opinion due to doubts on the recoverability of dues from three partiesaggregating to INR 245 Crore (refer to Note 18 of the Consolidated Financial Statements).

Reply: After reviewing recoverability of the advance in FY 2019-20the subsidiaries of the company have created provision for Capital advances Supplieradvance and doubtful debts amount to Rs.245 crores. However the efforts for the recoverywill continue.

6. Auditors of 1 subsidiary company have also highlightednon-compliance to the Indian Accounting Standards governing Investment Property on thegrounds that the subject properties have not been valued in with the methodologyprescribed under the applicable Accounting Standard but as per the value prescribed bythe Government of Karnataka (refer to Note 5C of the Consolidated Financial Statements).

Reply: There is no impact on the financials however the company couldnot disclose certain details as required under IND AS.

7. We draw attention to the Note 62 of the Consolidated FinancialStatements wherein it is described that on March 10 2021 the National Company LawTribunal (‘NCLT?) has initiated Corporate Insolvency

Resolution Process (‘CIRP?) against one of the keystep-subsidiaries of the Group namely M/s. Sical Logistics Limited. Considering the factthat the CIRP was initiated towards the end of the fourth quarter the Management has usedthe last reviewed financial results available (i.e. results until December 31 2021) dueto the non-availability of results up to the date of loss of control.

Further auditors of 1 subsidiary which in-turn has 3 step downsubsidiaries and 2 Joint ventures along with the auditors of 1 subsidiary and 2 step-downsubsidiaries have also emphasized that the amounts recoverable from M/s. SICAL LogisticsLimited in the view of the Management can be ascertained only after the receipt of finalreport from the NCLT. Accordingly no provision is made against the same.

Reply: Management has used the last reviewed financial resultsavailable (i.e. results until December 31 2020) due to the non-availability of resultsup to the date of loss of control. Regarding recoverability the auditor has emphasized afactual matter.

8. The auditor of parent and 1 subsidiary has also highlighted that theCompany (refer to Note 60 of the Consolidated Financial statements) is required to beregistered under section 45-IA of the Reserve Bank of India Act 1934 pertaining to year2019-20 and has sought a one-time exemption of the same and response from the Reserve Bankof India (RBI) is awaited.

Reply: The Company has applied one time exemption from NBFC provisionsto RBI and company is awaiting response from RBI.

9. The auditors of 1 subsidiary issued a disclaimer of opinion due tonon-availability of appropriate evidence confirmation of balances and statement ofaccounts with regard to borrowings from certain lenders and the auditor of 1 step-downsubsidiary have emphasized the same in their report (refer Note 67 of the ConsolidatedFinancial Statements)

Reply: Management is following up with lenders to get the balanceconfirmations.

10. The Statements of the Group have been prepared by the Managementand Board of Directors using the going concern assumption. The matters detailed in theabove paragraphs may have a consequential implication on the Group?s ability tocontinue as a going concern (refer to Note 61 of the Consolidated Financial Statements).Further the material uncertainty over using the Going Concern assumption has also beenestablished by several other component auditors of the Group as well. However the Groupis confident of meeting its obligations in the normal course of business and accordinglythe accounts of the Group have been prepared on a Going Concern Basis.

Further auditors of 3 subsidiary 7 step down subsidiaries and 1 Jointventures have expressed that there is a material uncertainty on going concern in theirreports.

Reply: These consolidated financial results for the quarter and yearended 31 March 2022 have been prepared on a going concern basis in view of the positivenet worth of the Group amounting to Rs 3775 crores as of 31 March 2022 significant valuein underlying businesses managed by subsidiaries / joint ventures / associatesestablished track record of the Group to monetize its assets as demonstrated by stake salein Mindtree Limited sale of portion of land in mangalore owned by its wholly-ownedsubsidiary Tanglin Developments Limited (refer note 5 of the Consolidated Financialstatements) sale of Way2Wealth Group entities (refer note 48(II) of the ConsolidatedFinancial statements) operational efficiencies and consequential ability to service itsobligations.

11. The Parent Company along with 1 of its subsidiary has entered intoan Agreement to sell Way2wealth Securities Private Limited and its certain subsidiaries toShriram Ownership Trust (‘the purchaser?) (refer Note 48(II) of the ConsolidatedFinancial Statements). Based on the agreement INR 12.10 Crore is receivable by thecompany in form of preceding year?s tax refunds and SEBI deposits from the purchaserin form of reimbursement subject to realisation. Further a sum of INR 2 Crore has beenwithheld by the purchaser per the agreement. An exceptional profit of INR 15.51 Crore hasbeen recognised on the said sale transaction at the Group level during FY 20-21.

Reply: The auditors have emphasized a factual matter. The above are asper agreement with the party

12. A show cause notice has been served on the company in May 2021under Rule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules 1995 inthe matter of shares held by the company and its subsidiaries in Mindtree Limited (ReferNote 68 of the Consolidated Financial Statements) and on December 7 2021 by SEBI in thematter of transfer of funds by Subsidiaries of the Company to

Mysore Amalgamated Coffee Estates Limited (MACEL) (Refer Note 69 of theConsolidated Financial Statements). We are informed that the matter is being discussedwith the legal counsels and appropriate representation will be made before theauthorities.

Reply: Management is discussing with the legal counsels and appropriaterepresentation will be made before the authorities.

13. The auditor of 1 subsidiary has emphasized (refer to Note 45F ofthe Consolidated Financial Statements) on the outstanding income tax dues of INR 101.61crores relating to for AY 2019-20 and AY 2020-21.

Reply: The auditor has emphasized a factual matter for which the impacthas been addressed in financials.

14. The auditors of 1 subsidiary which in turn has 3 step-downsubsidiaries and 2 joint ventures have drawn attention to the details of cases filedagainst the company before NCLT (refer Note 46(f) of the Consolidated FinancialStatements) which was subsequently dismissed. Further the auditors have also emphasizedthat interest expense of Rs. 97.07 crores as against Rs 16.13 crores of non-provision ofinterest during the previous year to two of its lenders (refer Note 46(h) of theConsolidated Financial Statements).

Reply: One of the lenders of Coffee Day Global Limited (subsidiary) hasmade an application as financial creditor before National Company Law Tribunal (NCLT) forrecovery of the dues. NCLT dismissed the application. The management Coffee Day GlobalLimited (subsidiary) has in line with its request to all lenders as per the proposedrestructuring plan decided not to provide interest on its borrowings outstanding for thefinancial year 2021-22 of Rs. 97.07 crores as against Rs 16.13 crores of non provision ofinterest during the previous year to two of its lenders.

15. The auditor of 1 subsidiary which in turn has 3 step-downsubsidiaries and 2 joint ventures has drawn attention to the liquidation process of theforeign subsidiaries (refer Note 48(I) of the Consolidated Financial Statements).

Reply: The foreign subsidiaries of Coffee Day Global Limited(subsidiary) are under liquidation and the process is ongoing and yet to conclude. Howeverthe Coffee Day Global Limited (subsidiary) does not have any additional liability inrespect of these limited liability corporations. Further 100% provision in respect ofinvestment in these foreign subsidiaries have already been made and accordingly there isno further impact on the financial statements of Coffee Day Global Limited (subsidiary).

16. The Auditors of 2 step-down subsidiaries of the Company haveemphasized that the Companies have impaired the investments made in M/s. Lakshmi VilasBank Ltd and recognized impairment loss during Financial Year 2020-21 of INR 1.86 Crore(refer Note 15 of the Consolidated Financial Statements)

Reply: This relates investment made by W2W. The auditor has emphasizeda factual matter for which the impact has been addressed in financials.

II. Following are the Disclaimers/Emphasis of matter/qualificationsgiven in the STANDALONE INDEPENDENT AUDITORS REPORT for the quarter/year ended 31stMarch 2022 and management response for the same.

1. We have not been provided with sufficient evidence with respect torecoverability of dues from group companies amounting to INR 1676 Crore (refer Note 7B ofthe standalone financial statement)). Further we have not been provided appropriateevidence about the recognition of fair value of the estimated loss allowance on corporateguarantee given to its subsidiary as required by Ind AS 109 ‘FinancialInstruments?. We are therefore unable to comment on the recoverability of the statedbalance from group companies fair value of estimated loss allowance on corporateguarantee given to a subsidiary and the impact on the Statement.

Reply: The subsidiaries of CDEL are in the process of disinvestment oftheir assets. The company is confident that the subsidiaries will repay these advances indue course.

2. It is observed that there has been a change in the percentage ofshares held by the Company in two of its subsidiaries as of March 31 2022 vis-a-vis March31 2019 due to the invocation of shares by the lenders of the subsidiaries. Howeverwhile considering the amount invested in the subsidiaries the Management of the Companyhas considered the erstwhile shareholding pattern prior to dilution as the Managementbelieves that the change in shareholding is temporary in nature and the shares pledgedwill be redeemed back by the Company (refer to Note 6 of the standalone financialstatement).

However these shares have been transferred to such lenders beforeMarch 31 2022. We have been informed that the lenders have not sold any of the sharesinvoked and consequently have not made any adjustments to the loan outstanding.Accordingly the Management believes that it is not possible to attribute any sale valueto the invoked shares. Consequently the impact of the said transfer on the book value ofinvoked shares of INR 156 Crores on the standalone financial statements cannot beascertained.

Reply: Management believes that the change in shareholding is temporaryin nature and the shares pledged will be released back to the Company. Since there is nomarketability for the shares invoked management is unable to estimate the impact.

3. The Management of the Company has determined that no impairment isrequired to be recognized on its investments in subsidiaries associates and jointventures with a carrying value of INR 1865 Crore as at March 31 2022 as required by IndAS 36 ‘Impairment of Assets? particularly consequent to developments duringthis period (as detailed in Note 41 of the standalone financial statement). Consequentlythe value of investments held by the Company in its subsidiary which is in turn affect bythe said step-subsidiary?s value is required to be assessed for impairment. Howeverwe have not been provided with the indicators used and the assessment performed by theManagement in order to arrive at this decision. We are therefore unable to comment onwhether the value of investments recognized in the Statement is appropriate.

Reply: The valuation of these investments for assessing impairmentremains to be done.

4. Attention is drawn to Note 14 of the Standalone FinancialStatements wherein instances of noncompliance with certain debt covenants includinginterest & principal repayment defaults have been described. We also draw attention tothe fact that the Company has not obtained the balance confirmations on loans fromlenders. In the absence of adequate and sufficient audit evidence to establish the amountspayable to the lenders we are unable to provide our opinion on the correctness of theseamounts reflected in the standalone financial statement and also on their consequentialimpact including potential tax liabilities. We have been informed that during the yearcertain lenders have exercised their right to recall the loan and some lenders haveinitiated legal action to recover dues. However in the absence of the adequate evidencewe are unable to comment on the consequential adjustments that might impact this Statementon account of non-compliance with debt covenants.

Further in view of the loan recall notices legal disputes and pendingone-time settlement with the lenders of the Company the Management has not recognisedinterest on the loans outstanding as of March 31 2022 aggregated to INR 68.30 Crores. Asthe loan recall letters provided by the lenders requires payment of interestnon-provision of interest is not in line with the accrual concept of accounting

Reply: Due to default in repayment of interest and principal to thelenders the lenders have sent "loan recall" notices to the Company as well asinitiated legal disputes. In view of the loan recall notices legal disputes and pendingonetime settlement with the lenders company has not recognised interest of Rs.68.30crores during the financial year. Management is following up with lenders to get thebalance confirmations. This will be taken care of during one time settlement process.There have been certain covenant breaches with respect to borrowings taken by the Companyfrom various lenders. Such covenant breaches entitle the lenders to recall the loan. Someof the lenders have exercised their right to recall the loan and one of the lenders hasinitiated legal process to recover the dues.

5. The Statement has been prepared by the Management and Board ofDirectors using the going concern assumption (Refer Note 39 of the standalone financialstatement). The matters detailed in the above paragraphs may have a consequentialimplication on the Company?s ability to continue as a going

concern. We are therefore unable to comment on whether the goingconcern basis for preparation of the standalone financial results is appropriate.

Reply: These standalone financial statements for year ended 31 March2022 have been prepared on a going concern basis in view of the positive net worth of theCompany amounting to Rs.30673 million as of 31 March 2022 significant value indiversified portfolio of investments held in subsidiaries / joint ventures / associatesestablished track record of the Company to monetize the group assets as demonstrated bysale of stake in Mindtree Limited sale of Global Village Tech Park owned by itswholly-owned subsidiary Tanglin Developments Limited sale of stake in Way2Wealth Groupentities profitable resorts operations and consequential ability to service theobligations.

6. In a letter dated July 27 2019 signed by late Mr. V. G. Siddharthathe Promoter and then Chairman and Managing Director of the Company which has come tolight it was inter-alia stated that the Management and auditors were unaware of all histransactions. The Board of Directors had initiated an investigation into the circumstancesleading to the statements made in the letter and to scrutinize the books of accounts ofthe Company and its subsidiaries.

The investigation report submitted to the Board of Directors on July24 2020 has concluded that Mysore Amalgamated Coffee Estates Limited (‘MACEL?)a related entity owes a sum of INR 3535 Crore to the subsidiaries of CDEL as on July 312019 of which a sum of INR 842 Crore was due to the subsidiaries as of March 31 2019leaving a balance of INR 2693 Crore as incremental outstanding which needs to beaddressed. Further the Board of the Company in the board meeting on August 21 2020appointed Retired Hon?ble Justice Sri K L Manjunath former Judge of Hon?bleHigh Court of Karnataka to suggest and oversee actions for recovery of the dues from MACELand to help on any other associated matters. The future course of action will be decidedby the Management based on the decision taken by the Hon?ble Justice Sri K LManjunath. Due to the demise of Sri K. L. Manjunath the Board in their meeting held onFebruary 7 2022 appointed Hon'ble Mr. Justice H N Nagamohandas a retired Judge of HighCourt of Karnataka to suggest and oversee actions for recovery of the dues from MACEL andto help on any other associated matters.

Reply: The auditors has emphasized a factual matter which does notrequire any accounting adjustments.

7. We draw attention to Note 29 of the standalone financial statementwherein facts relating to the sale of Way2Wealth Securities Private Limited and itscertain subsidiaries has been described. Based on the agreement Rs. 4.63 Crore isreceivable by the company in form of preceding year?s tax refunds and SEBI depositsfrom the purchaser (Shriram Ownership Trust) in form of reimbursement subject torealization. Further a sum of Rs. 0.77 Crore has been withheld by the purchaser per theagreement. Exceptional Loss of Rs. 46.50 Crore has been recognized on the said saletransaction in FY 2020-21.

Reply: The auditors have emphasized a factual matter. The above are asper agreement with the party.

8. We draw attention to the Note 40 of the standalone financialstatement wherein the Company has stated that Corporate Insolvency Resolution Process hasbeen initiated in NCLT against one of its key step-subsidiary M/s. SICAL LogisticsLimited (SLL) pursuant to which an Interim Resolution Professional has been appointed tolook into the affairs of the key step-down subsidiary. The Management is of the view thatthe recoverability of above amount from SLL can be ascertained only after the receipt ofreport from the Resolution Professional and accordingly no provision is made against thesame.

Reply: The auditors have emphasized a factual matter. The managementawaits report from the resolution professional.

9. A show cause notice has been served on the company in May 2021 underRule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules 1995 in thematter of shares held by the company and its subsidiaries in Mindtree Limited (Refer Note42 of the standalone financial statement) and on December 7 2021 by SEBI in the matter oftransfer of funds by Subsidiaries of the Company to Mysore Amalgamated Coffee EstatesLimited (MACEL) (Refer Note 43 of the standalone financial statement). We are informedthat the matter is being discussed with the legal counsels and appropriate representationwill be made before the authorities.

Reply: Management is discussing with the legal counsels and appropriaterepresentation will be made before the authorities.

10. As detailed in Note 38 of the standalone financial statement theCompany has filed an application seeking a onetime exemption from registering itself as aNon-Banking Financial Company (NBFC) as required by Section 45-IA of the Reserve Bank ofIndia Act 1934 and other related provisions. As at the date of this Statement a responsefrom the Reserve Bank of India is awaited. In the absence of such exemption we are unableto comment on the compliance with the aforesaid regulations and consequential impact ifany on this Statement.

Reply: The Company has applied one time exemption from NBFC provisionsto RBI and company is awaiting response from RBI.

B. SECRETARIAL AUDIT POINTS:

1. The Board of Directors of the top 2000 listed entities (with effectfrom April 1 2020) shall comprise of ‘not less than six directors?. However itis noticed that the company could not comply the same for the period starting from 30thJune 2021 to 12th Nov 2021. The Stock Exchanges have levied penalty for thesaid default.

Reply: As per Reg 17 of SEBI (LODR) Regulations 2015 the Companyshould have minimum of six Directors. The Company had Six Directors till the resignationDr. Albert Hieronimus on 30th June 2021. The Management could not find the suitablecandidate for the post of Director due to the inconvenience caused by COVID. However on12th November 2021 the Board appointed Dr. I. R. Ravish as Additional Director. Both theExchanges have levied penalty for the said non-compliance however the Company has appliedfor waiver of the said penalty.

2. On 6 April 2022 the Company made a Disclosure in terms of SEBIcircular No. SEBI/HO/CFD/CMD1/CIR/P/2019/140 for the quarter ended 31 March 2022 regardingthe disclosures of defaults on payments of Interest / Repayment of principal amount onloans from Banks / Financial institutions and unlisted debt securities. As per thedisclosure the Company has defaulted in payment of interest and principal amounting toRs. 2306.6 million on loans/cash credits from banks/financial institutions and Rs. 2490.2million towards Unlisted debt securities i.e. Nonconvertible Debentures.

Reply: This is Due to liquidity issue and COVID 19 challenges faced bythe Company.

3. The amount due by Mysore Amalgamated Coffee Estates Limited (MACEL)a related party to various subsidiaries and joint venture of the Company amounting to Rs.3430.67 Crores is yet to be recovered. The Management of Company informed that it hadappointed Justice KL Manjunath ExJudge of the Honourable High Court to submit the reportand to suggest and oversee the actions for recovery of dues. Due to his untimely demisethe Company appointed retired Justice Mr. Nagamohandas Ex-Judge of the Honourable HighCourt in place of Late Justice K.L Manjunath to submit the report and same is awaited.

Reply: The Auditors have stated factual matters the Company hasappointed retired Justice Mr. Nagamohandas Ex-Judge of the Honourable High Court in placeof Late Justice K.L Manjunath to suggest and oversee the actions for recovery of dues fromMACEL to subsidiaries of the Company. The Management is waiting for the report to besubmitted by retired Justice Mr. Nagamohandas for further action.

4. The National Company Law Tribunal has initiated a CorporateInsolvency Resolution Process against one of the subsidiaries Sical Logistics Limited.

Reply: the Auditors have given the factual matters National CompanyLaw Tribunal has initiated a Corporate Insolvency Resolution Process against one of thesubsidiaries.

5. A show cause notice has been served on the company on May 12 2021under Rule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules 1995 inthe matter of shares pledged in prior years by the company and its subsidiary in MindtreeLimited. The matter is being represented before authorities. The company and itssubsidiary had sold its entire stake in Mindtree Limited on 30 April 2019. The Companyopted for Adjudication proceedings in this regard and the arguments of Legal counselappointed by the Company was heard and decision of SEBI is awaited.

Reply: The Company has placed its arguments through the legal counseland decision of SEBI is awaited.

6. A show cause notice has been served on the Company on December 72021 by the Securities Exchange Board of India (SEBI) in the matter of transfer of fundsby Subsidiaries of the Company to Mysore Amalgamated Coffee Estates Limited. The SEBIproceedings are under process.

Reply: The Company is providing necessary information to SEBI as andwhen demanded. The decision of SEBI is awaited.

Risk Management and Assessment:

The Company is exposed to various risks considering the diversifiedparameters according to the different major business sectors of the Company that is coffeebusiness and resort business. The Audit Committee oversees the area of financial risksand controls. Major risks identified by the business and functions are systematicallyaddressed through mitigating actions on continuing basis. The Company has incorporatedsustainability in the process which helps the Board to align potential exposures with therisk appetite and highlight risks associated with chosen strategies.

Details in respect of frauds reported by Auditors under Section143(12):

There was no instance of fraud during the year under review whichrequired the Statutory Auditors to report to the Audit Committee and / or Board underSection 143(12) of the Act and the rules made thereunder.

Statutory Disclosures:

None of the Directors of your Company are disqualified as perprovisions of Section 164(2) of the Companies Act 2013. Your Directors have madenecessary disclosures as required under various provisions of the Act and SEBI (ListingObligations and Disclosure Requirements) Regulation 2015.

General Disclosures:

a) Buy back of securities:

In accordance with Section 68 of the Act the Company has not boughtback any of its securities during the year.

b) Sweat Equity:

The Company has not issued any Sweat Equity Shares under the provisionsof Section 54 of the Act.

c) Bonus Shares:

In terms of Section 63 of the Act the Company had not issued BonusShares during the year under review.

d) Employee Stock Option Plan:

Pursuant to the provisions of Section 62 of the Act the Company hasnot provided any Stock Option to the Employees of the Company.

Appreciation:

The Board acknowledges and places on record its? appreciation forthe contributions and hard work of Chief Executive Officer Chief Financial OfficerCompany Secretary & Compliance officer and their team specifically in the last 3 yearsfor continued operations and effective interaction with all stakeholders and statutoryagencies.

Acknowledgement:

The Directors would like to express their gratitude towards theCompany's employees customers Banks and institutions investors and academic partnersfor their continuous support. They also thank the concerned government departments andagencies for their co-operation. The Directors appreciate and value the contribution madeby every member of the ‘Coffee Day? family.

For Coffee Day Enterprises Limited
Sd/- Sd/-
S.V. Ranganath Malavika Hegde
Interim-Chairman & Whole-time Director
Independent Director DIN:00136524
DIN: 00323799
Place: Bangalore
Date: 30th May 2022

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