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Den Networks Ltd.

BSE: 533137 Sector: Media
NSE: DEN ISIN Code: INE947J01015
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NSE 00:00 | 06 Dec 39.90 -1.15
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OPEN 41.00
PREVIOUS CLOSE 41.05
VOLUME 121871
52-Week high 71.90
52-Week low 37.35
P/E 9.69
Mkt Cap.(Rs cr) 1,909
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 41.00
CLOSE 41.05
VOLUME 121871
52-Week high 71.90
52-Week low 37.35
P/E 9.69
Mkt Cap.(Rs cr) 1,909
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Den Networks Ltd. (DEN) - Auditors Report

Company auditors report

TO THE MEMBERS OF

DEN NETWORKS LIMITED

Report on the Audit of Standalone Financial Statements

Opinion

We have audited the standalone financial statements of DEN NETWORKSLIMITED (“the Company") which comprise the balance sheet as at 31stMarch 2021 and the statement of Profit and Loss (including other comprehensive income)statement of changes in equity and statement of cash flows for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information (hereinafter referred to as “standalone financialstatements”).

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at 31st March 2021 and profit (including othercomprehensive income) statement of changes in equity and its cash flows for the yearended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing(SAs) specified under section 143(10) of the Companies Act 2013 (“the Act”).Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India (“ICAI”) together with the ethicalrequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's 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 judgmentwere of most significance in our audit of the standalone financial statements for the yearended 31st March 2021. These matters were addressed in the context of ouraudit of the standalone financial statements as a whole and in forming our opinionthereon and we do not provide a separate opinion on these matters.

Key Audit Matters How our audit addressed the key audit matter
(i) Investments in Equity share of Subsidiaries and Associates
As at 31st March 2021 the Company has total investments of Rs. 5562.26 Million in shares and debentures of subsidiaries / associates which constitutes 59.55 % of the total non current assets of the Company. Management regularly reviews whether there are any indication of impairment on the investment made by the company by reference to the requirement under Ind AS 36 "Impairment of Assets" Accordingly Management has identified impairment indication (operating losses negative Net worth and sustainably eroded net worth) in equity investments in subsidiaries/associates of the Company with an investment of Rs. 2659.40 Million. As a result impairment assessment has been performed by the Company by comparing the carrying value of these investments to their recoverable amount to determine whether impairment was required to be recognised. Our audit procedures included the following:
For the purpose of the above impairment testing recoverable amount has been determined by forecasting and discounting future cash flows. The determination of recoverable amounts of investments in these subsidiaries involved judgement due to inherent uncertainty in the assumption supporting the recoverable amounts of these investments. • Assessing the appropriateness of the methodology applied in determining the recoverable amount.
Accordingly the evolution of impairment of above investments is determined to be a key audit matter. • Assessing the assumptions around the key drivers of the cash flow forecasts including change in business module
• Discussion/evaluation of potential changes in key drivers as compared to the previous year with management in order to evaluate whether the inputs and assumption used are suitable.
• Testing the arithmetical accuracy of the impairment model prepared by the management.
• Considered the completeness and accuracy of the disclosures which are included in note 35 of the standalone financial statements.
(ii) Litigations Matters & Contingent liabilities
The Company is subject to number of significant litigations. Major risks identified by the Company in that area relate to VAT liability on account of transfer of set top boxes entertainment tax and license fees liability from DOT on account of dispute to consider non business for AGR calculation and dispute in duty assessment. The amounts of litigations may be significant and estimates of the amounts of provisions or contingent liabilities are subject to significant management judgment. (Refer Note No. 26 and 42) Our audit procedures included the following
Due to complexity involved in these litigation matters management's judgment regarding recognition and measurement of provisions for these legal proceedings is inherently uncertain and might change over time as the outcomes of the legal cases are determined and it has been considered as a key audit matter. • Assessing the procedures implemented by the company to identify and gather the risks it is exposed to.
• Discussion with the management on the development in theses litigations during the year ended 31st March 2021.
• Obtaining an understanding of the risk analysis performed by the company with the relating supporting documentation and studying written statements from internal / external legal experts when applicable.
• Verification that the accounting and / or disclosures as the case may be in the standalone financial statements is in accordance with the assessment of legal counsel/management.
• Obtaining representation letter from the management on the assessment of those matters as per SA 580 (revised) - written representations.

Information Other Than The Financial Statements and Auditors'Report Thereon

The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the annual reportbut does not include the financial statements and our auditor's report thereon.

Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance forthe Standalone Financial Statements

The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these standalonefinancial statements that give a true and fair view of the financial position financialperformance changes in equity and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the accounting Standardsspecified under section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate implementation and maintenance ofaccounting 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 standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone financial statements management isresponsible 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.

Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.

Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements

Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control. Obtain an understanding of internal financial controls relevant tothe audit in order to design audit procedures that are appropriate in the circumstances.Under section 143(3) (i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls with reference to thestandalone financial statements in place and the operating effectiveness of such controls.Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management. Conclude on theappropriateness of management's use of the going concern basis of accounting andbased on the audit evidence obtained whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the ability of the Company tocontinue as a going concern. If we conclude that a material uncertainty exists we arerequired to draw attention in our auditor's report to the related disclosures in thestandalone 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 ceaseto continue as a going concern. Evaluate the overall presentation structure and contentof the standalone financial statements including the disclosures and whether thestandalone financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current year and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication

Report on Other Legal and Regulatory Requirements

1 As required by the Companies (Auditor's Report) Order 2016(“the Order”) issued by the Central Government of India in terms of sub-section(11) of section 143 of the Companies Act 2013 we give in the “Annexure B” astatement on the matters specified in paragraphs 3 and 4 of the Order to the extentapplicable.

2 As required by Section 143(3) of the Act we report that:

(a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.

(b) In our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books.

(c) The Balance Sheet the Statement of Profit and Loss including othercomprehensive income the Statement of Changes in Equity and the Cash Flow Statement dealtwith by this Report are in agreement with the books of account.

(d) In our opinion the aforesaid standalone financial statementscomply with the Indian Accounting Standards specified under Section 133 of the Act.

(e) On the basis of the written representations received from thedirectors as on 31st March 2021 taken on record by the Board of Directorsnone of the directors is disqualified as on 31st March 2021 from beingappointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controlswith reference to financial statement of the Company and the operating effectiveness ofsuch controls refer to our separate Report in “Annexure A”.

(g) In our opinion the managerial remuneration for the year ended 31stMarch 2021 has been paid / provided by the Company to its directors in accordance withthe provisions of section 197 read with Schedule V to the Act.

(h) With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 in our opinion and to the best of our information and according to theexplanations given to us:

(i) The Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements. Refer Note 26 & 42 to thestandalone financial statements .

(ii) The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses.

(iii) There were no amounts which were required to be transferred tothe Investor Education and Protection Fund by the Company.

“ANNEXURE A” TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 2(f) under ‘Report on Other Legal andRegulatory Requirements' section of our report of even date)

Report on the Internal Financial Controls with reference to theaforesaid standalone financial statements under Clause (i) of Sub- section 3 of Section143 of the Companies Act 2013 (“the Act”)

We have audited the internal financial controls with reference tostandalone financial statements of DEN NETWORKS LIMITED (“the Company”) as of 31stMarch 2021 in conjunction with our audit of the standalone financial statements of theCompany for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control with reference tostandalone 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. These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the internal financialcontrols with reference to standalone financial statements of the Company based on ouraudit. We conducted our audit in accordance with the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting (the “Guidance Note”) issued by theInstitute of Chartered Accountants of India (“ ICAI”) and the Standards onAuditing prescribed under Section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls withreference to standalone financial statements was established and maintained and if suchcontrols operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls with reference to standalone financialstatements and their operating effectiveness. Our audit of internal financial controlswith reference to standalone financial statements included obtaining an understanding ofinternal financial controls over financial reporting assessing the risk that a materialweakness exists and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. The procedures selected depend on theauditor's judgement including the assessment of the risks of material misstatementof the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls with reference to standalone financial statements.

Meaning of Internal Financial Controls with reference to financialstatements

A company's internal financial control with reference to financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A company's internalfinancial control with reference to financial statements includes those policies andprocedures that

(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;

(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and

(3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assetsthat could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls with reference tofinancial statements

Because of the inherent limitations of internal financial controls withreference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financial control with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.

Opinion

In our opinion to the best of our information and according to theexplanations given to us the Company has in all material respects an adequate internalfinancial controls with reference to standalone financial statements and such internalfinancial controls with reference to financial statements were operating effectively as at31st March 2021 based on the internal control with reference to financialstatements criteria established by the

Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the ICAI.

“ANNEXURE B” TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1 under ‘Report on Other Legal andRegulatory Requirements' section of our report of even date)

(i) In respect of its property plant and equipment:

a. The Company has maintained proper records showing full particularsincluding quantitative details and situation of property plant and equipment.

b. The Company has a program of verification of property plant andequipment to cover all items in a phased manner over a period of three years other thanset top boxes which are in possession of c ustomers/third parties and distributionequipment comprising overhead and underground cables. Management is of the view that it isnot possible to physically verify these assets due to their nature and location. Pursuantto the program certain property plant and equipment were physically verified by themanagement during the year. According to the information and explanations given to us theexistence of set top boxes is verified on the basis of the ‘active user' statusin the system. No material discrepancies were noticed on such verification.

In our opinion other than for physical verification of set top boxesand distribution equipment referred to above the frequency of verification of propertyplant and equipment is reasonable having regard to the size of the Company and the natureof its assets.

c. The Company does not have any immovable properties of freehold orleasehold land and building and hence reporting under clause

(i)(c) of the Order is not applicable to the Company.

(ii) The Company does not have any inventory. Therefore provision ofclause (ii) of paragraph 3 of the said Order is not applicable to the company.

(iii) The Company has not granted any loans secured or unsecured tocompanies firms Limited Liability Partnerships or other parties covered in the Registermaintained under Section 189 of the Companies Act 2013. Therefore provision paragraph 3(iii) of the Order are not applicable to the company.

(iv) In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of Sections 185 and 186 of theCompanies Act 2013 in respect of grant of loans making investments.

(v) According to the information and explanations given to us theCompany has not accepted any deposits from the public. The Company does not have anyunclaimed deposits and accordingly the provisions of Sections 73 to 76 or any otherrelevant provisions of the companies Act 2013 are not applicable to the Company.

(vi) The maintenance of cost records has been specified by the CentralGovernment under section 148(1) of the Companies Act 2013. We have broadly reviewed thecost records maintained by the Company pursuant to the Companies (Cost Records and Audit)Rules 2014 as amended and the Cost Records and Audit (Telecommunication Industry) Rulesprescribed by the Central Government under sub-section (1) of Section 148 of the CompaniesAct 2013 and are of the opinion that prima facie the prescribed cost records have beenmade and maintained. We have however not made a detailed examination of the cost recordswith a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us inrespect of statutory dues:

a. The Company has generally been regular in depositing undisputedstatutory dues including Provident Fund Employees' State Insurance Income-taxGoods and Services Tax Customs Duty Cess and other material statutory dues applicable toit to the appropriate authorities.

b. There were no undisputed amounts payable in respect of ProvidentFund Employees' State Insurance Income-tax Goods and Services Tax Sales TaxService Tax Customs Duty Value Added Tax Cess and other material statutory dues inarrears as at 31st March 2021 for a period of more than six months from thedate they became payable other than the dues related to entertainment tax the details ofwhich are given below:

Name of Statute Nature of Dues Amount Involved (Rs. In million) Period to which the amount relates Due date
Delhi Entertainment Tax Act 1996 Entertainment Tax 1.64 June 2017 days Within from the expiry of each month

c. Details of dues of Sales Tax Service Tax Customs Duty and ValueAdded Tax/Goods & Service Tax which have not been deposited as on 31stMarch 2021 on account of disputes are given below:

Name of Statute Nature of Dues Forum where Dispute is pending Period to which the amount relates Amount unpaid (Rs. in million)
The Uttar Pradesh Value Added Tax Act 2008 Value Added Tax Assessing Officer (AO) April 2017 to March 2018 4.41
The Uttar Pradesh Value Added Tax Act 2008 Value Added Tax Commercial Tax Tribunal April 2012 to March 2013 9.09
The Uttar Pradesh Value Added Tax Act 2008 Value Added Tax Additional Commissioner (Appeal) April 2015 to March 2016 -
The Uttar Pradesh Value Added Tax Act 2008 Value Added Tax Deputy Commissioner April 2016 to March 2017 -
Central Goods and Service Tax Act 2017 Goods and Service Tax (GST) Deputy Commissioner April 2017 to March 2018 -
Central Sales Tax Act 1956 & Gujarat Value Added Tax Act 2003 Central Sales Tax Deputy Commissioner (Appeal) April 2015 to March 2016 0.58
Uttarakhand Value Added Tax Act 2005 Value Added Tax Joint Commissioner (Appeals) April 2014 to March 2017 21.55
Rajasthan Value Added Tax 2003 Value Added Tax and Central Sales Tax Assessing Officer (AO) April 2016 to March 2017 10.31
Maharashtra Value Added Tax 2002 Value Added Tax and Central Sales Tax Joint Commissioner of Sales Tax (Appeal) April 2014 to March 2015 10.37
Karnataka Value Added Tax 2003 Value Added Tax and Central Sales Tax High Court April 2008 to March 2009 28.02
Karnataka Value Added Tax 2003 Value Added Tax and Central Sales Tax Appellate Tribunal April 2009 to June 2016 275.84
Jharkhand Value Added Tax 2004 Delhi Value Added Tax 2004 Value Added Tax Value Added Tax Assessing Officer (AO) Special Commissioner - Department of Trade & Taxes (Appeal) April 2014 to March 2016 April 2013 to March 2017 70.51 7.10
Delhi Value Added Tax 2004 Bihar Value Added Tax 2005 Central Sales Tax Value Added Tax Commissioner (appeals) Assessing Officer (AO) April 2016 to March 2017 April 2012 to March 2014 0.83 26.99
Sub Total of Sales Tax and Value Added Tax 465.60*
Name of Statute Nature of Dues Forum where Dispute is pending Period to which the amount relates Amount unpaid (Rs. in million)
Custom Act 1962 Custom Duty Directorate of Revenue Intelligence February 2012 to December 2016 180.75**

*Net of Rs. 142.79 million under protest.

** Net of Rs. 103.87 million under protest.

(viii) In our opinion and according to the information and explanationsgiven to us the Company has not defaulted in the repayment of loans or borrowings tofinancial institution and banks. The Company has not taken any loans or borrowing fromgovernment and has not issued any debentures during the year.

(ix) In our opinion and according to the information and explanationsgiven to us the Company has not raised moneys by way of initial public offer or furtherpublic offer (including debt instruments) and no term loans raised during the year.Therefore provision of clause (ix) of paragraph 3 of the order is not applicable to theCompany.

(x) To the best of our knowledge and according to the information andexplanations given to us no fraud by the Company and no material fraud on the Company byits officers or employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanationsgiven to us the Company has paid / provided managerial remuneration in accordance withthe requisite approvals mandated by the provisions of section 197 read with Schedule V tothe Companies Act 2013.

(xii) The Company is not a Nidhi Company and hence reporting underclause (xii) of the Order is not applicable.

(xiii) In our opinion and according to the information and explanationsgiven to us the Company is in compliance with Section 177 and 188 of the Companies Act2013 where applicable for all transactions with the related parties and the details ofrelated party transactions have been disclosed in the standalone financial statements etc.as required by the applicable accounting standards.

(xiv) According to the information and explanations give to us andbased on our examination of the records of the Company the Company has not madepreferential allotment of shares during the year under audit. Further amount raised duringthe year ended 31st March 2019 have been temporarily deployed pendingapplication of proceeds.

(xv) In our opinion and according to the information and explanationsgiven to us during the year the Company has not entered into any non-cash transactionswith its directors or directors of its holding subsidiary companies or associates asapplicable or persons connected with them and hence provisions of section 192 of theCompanies Act 2013 are not applicable.

(xvi) The Company is not required to be registered under section 45-IAof the Reserve Bank of India Act 1934.

For Chaturvedi & Shah LLP
Chartered Accountants
Firm's Registration No. 101720W/W100355
Vijay Napawaliya
Partner
Membership No. 109859
UDIN: 21109859AAAABL7833
Place: Mumbai
Date: 16th April 2021

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