To the Members of GHCL Limited
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of GHCL Limited("the Company") which comprise the Balance sheet as at March 31 2019 theStatement of Profit and Loss including the statement of Other Comprehensive Income theCash Flow Statement and the statement of Changes in Equity for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2019its profit including other comprehensive income its cashflows and the changes in equityfor the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' sectionof our report. We are independent of the Company in accordance with the Code ofEthics' issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the Standalone IndAS financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Ind
AS financial statements for the financial year ended March 31 2019. These matters wereaddressed in the context of our audit of the Standalone Ind AS financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters. For each matter below our description of how our audit addressed thematter is provided in that context.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the Standalone Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the Standalone Ind AS financial statements. The results of ouraudit procedures including the procedures performed to address the matters below providethe basis for our audit opinion on the accompanying Standalone Ind AS financialstatements.
|Key audit matters ||How our audit addressed the key audit matter |
|Impairment assessment of home textile division (as described in note 3 of the standalone Ind AS financial statements) |
|Property plant and equipment includes assets that are related to the integrated textile manufacturing facilities (at Tamil Nadu) Home Textiles facility (in Gujrat) and investments made in subsidiary to support the business hereafter collectively referred to as the "Home Textile Division or HT Division" with a carrying value amounting to Rs. 494 crores. || Understood management and the board's controls over the assessment of the carrying value of HTD's property plant and equipment to determine whether any asset impairment was required. |
| || Together with our valuation specialists we assessed the Company's valuation methodology applied in estimating the recoverable amount of the Company's Home Textile Division. |
|Home Textile Division has incurred losses in the last two years as a result the management has performed an impairment assessment as per the accounting policy stated in note 2.2.L to the standalone Ind AS financial statements. || Together with our valuation specialists we tested the assumptions around the key drivers of the cash flow forecasts i.e. future growth rates discount rates used. |
|Our audit focused on this area because the assessment of recoverable value of the aforesaid assets of HT Division requires management to make a number of key judgements and estimates with respect to the future performance and profitability of the HT Division which involves judgements and estimates on future growth rates discount rates etc. || Performed sensitivity analysis around the key assumptions used by management in impairment testing to understand the impact of reasonable changes in assumptions on the estimated recoverable amounts. |
|Accordingly Impairment assessment of the Company's Home Textile division has been considered as a key audit matter. || Assessed the disclosures included in the financial statements in note 3 to the standalone Ind AS financial statements. |
|Key audit matters ||How our audit addressed the key audit matter |
|Revenue Recognition || |
|(as described in note 2.2.c of the standalone Ind AS financial statements) |
|For the year ended March 31 2019 the Company has recognized revenue from contracts with customers amounting to 3371.18 Crores. ||Our audit procedures included the following: |
|Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ||Assessed the Company's revenue recognition policy prepared as per Ind AS 115 'Revenue from contracts with customers'. |
| || Assessed the design and tested the operating effectiveness of internal controls related to revenue recognition discounts and rebates. |
|The Company has generally concluded that as principal it typically controls the goods or services before transferring them to the customer. || |
|The variety of terms that define when control are transferred to the customer as well as the high value of the transactions give rise to the risk that revenue is not recognized in the correct period. || Performed sample tests of individual sales transaction and traced to sales invoices sales orders and other related documents. Further in respect of the samples checked that the revenue has been recognized as per the shipping terms. |
|Revenue is measured net of net of returns and allowances cash discounts trade discounts and volume rebates (collectively discount and rebates'). There is a risk that these discount and rebates are incorrectly recorded as it also requires a certain degree of estimation resulting in understatement of the associated expenses and accrual. || To test cut off selected sample of sales transactions made pre- and post-year end agreeing the period of revenue recognition to third party support such as transporter invoice and customer confirmation of receipt of goods. |
| || Tested the provision calculations related to management incentives discounts and rebates by agreeing a sample of amounts recognized to underlying arrangements with customers and other supporting documents. |
|Revenue is also an important element of how the Company measures its performance. The Company focuses on revenue as a key performance measure which could create an incentive for revenue to be recognized before the risk and rewards have been transferred. || |
| || Performed monthly analytical procedures of revenue by streams to identify any unusual trends. |
|Accordingly due to the significant risk associated with revenue recognition in accordance with terms of Ind AS 115 Revenue from contracts with customers' it was determined to be a key audit matter in our audit of the standalone Ind AS financial statements. || Obtained confirmations from customers on sample basis to support existence assertion of trade receivables and assessed the relevant disclosures made in the financial statements; to ensure revenue from contracts with customers are in accordance with the requirements of relevant accounting standards. |
We have determined that there are no other key audit matters to communicate in ourreport.
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report 2018-19 but does notinclude the Standalone Ind AS financial statements and our auditor's report thereon.
Our opinion on the Standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether suchother information is materially inconsistent with the standalone Ind AS financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Responsibilities of Management for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these Standalone Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified [the Companies (Indian AccountingStandards) Rules 2015 as amended. 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 accounting policies; makingjudgments and estimates that are reasonable and prudent; and the design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the Standalone Ind AS financial statements that give atrue and fair view and are free from material misstatement whether due to fraud or error.
In preparing the Standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the Standalone Ind ASfinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these Standalone Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the Standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant Company's ability 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 thefinancial statements or if such disclosures are inadequate to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the Standalone IndAS financial statements including the disclosures and whether the Standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the Standalone Ind AS financialstatements for the financialyear ended March 31 2019 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
(c) The Balance Sheet the Statement of Profit and Loss including the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid Standalone Ind AS financial statements comply withthe Accounting Standards specified Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended;
(f) 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;
(g) With respect to the adequacy of the internal financial controls over financialreporting of the these Standalone Ind AS financial statements and the operatingeffectiveness of such controls refer to our separate Report in "Annexure 2" tothis report;
(h) In our opinion the managerial remuneration for the year ended March 31 2019 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;
(i) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements Refer Note 34 to the standalone IndAS financial statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
| ||For S.R. Batliboi & Co. LLP |
| ||Chartered Accountants |
| ||ICAI Firm Registration Number: 301003E/E300005 |
| ||per Atul Seksaria |
|Place: New Delhi ||Partner |
|Date: April 25 2019 ||Membership No. 086370 |