To the Members of Lux Industries Limited
Report on the audit of Standalone Ind AS financial statements
We have audited the standalone financial statements of Lux IndustriesLimited ("the Company") which comprise the Balance Sheet as at March 31 2021and the Statement of Profit and Loss including Other Comprehensive Income Statement ofChanges in Equity and Statement of Cash Flows for the year then ended and notes to thefinancial statements including a summary of significant accounting policies and otherexplanatory information for the year ended on that date (hereinafter referred to as"Ind AS financial statements").
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 Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2021and profit and total comprehensive income changes in equity and its cash flows for theyear ended 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 Act. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit ofthe Standalone Financial Statements section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (ICAI) together with the independence ethical requirements that arerelevant to our audit of the financial statements under the provisions of the Act and theRules thereunder and we have fulfilled our other ethical responsibilities in accordancewith these requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
We draw attention to Note 45 to the standalone financial statementwhich describes the uncertainties and potential impact of the Covid-19 pandemic on theCompany's operation and results as assessed by the management. The actual results maydiffer from such estimates depending upon future developments. Our opinion is not modifiedin respect of this matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements for the financial yearended March 31 2021. These matters were addressed in the context of our audit of thefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.
We have determined the matters described below to be the key auditmatters to be communicated in our report. For each matter below our description of howour audit addressed the matter is provided in that context.
|Key audit matters ||How our audit addressed the key audit matter |
|Accounting for the Scheme of amalgamation || |
|During the year the Company had received final approval for scheme of arrangement for amalgamation of "J.M. Hosiery & Company Limited" and "Ebell Fashions Private Limited" (jointly referred to as Transferor Companies") as set out in Note 44 of the standalone financial statements. ||Our procedures included but were not limited to: |
|The Amalgamation has been accounted for in accordance with the treatment provided for pooling of interests' method as provided in Appendix C of Ind AS 103 Business Combinations' and comparatives have been restated. || We examined the terms and conditions of the scheme of arrangement and examined the accounting treatment as prescribed and approved; |
|Accounting for the amalgamation has involved judgment in order to: || We have examined the restated comparative financial information of the Company after incorporating the financial information of the Transferor Companies as prepared by the management of the Company; |
| Recording of all assets and liabilities including reserves of the transferor companies pursuant to amalgamation; || We have checked the elimination of inter-company transactions and balances; |
| Restatement of comparative financial statements of the Company; || Evaluating appropriateness of adequate disclosures in accordance with the applicable accounting standards. |
| Elimination of inter-company transactions and balances; || |
|This is material for the Company and accordingly we considered it to be a key audit matter. || |
|Revenue from Sale of Goods || |
|The Company recognizes revenue when control of the goods is transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. ||Our audit procedure includes the following: |
|As described in the accounting policy in note 3(i) and as reflected in note 23 to the Ind AS Standalone financial statements revenue from sale of goods is measured at fair value of the consideration received or receivable net of returns and allowances trade discounts and volume rebates / incentives. || Considered the adequacy of the company's revenue recognition policy and its compliance in terms of Ind AS 115 "Revenue from contracts with customers' |
|The Company has various incentive schemes for its retailers and distributors which are based on volume of sales achieved during the stipulated period. || Assessed the design and tested the operating effectiveness of the internal financial controls related to revenue recognition. |
|The estimate of sales likely to be achieved by each retailer / distributor requires judgment. || Performed sample tests of individual sales transaction and traced to sales invoices and other related documents. In respect of the samples selected tested and the revenue has been recognized in accordance with Ind AS 115. |
|Considering the judgment and estimates involved in revenue recognition it is considered to be a key audit matter. || We discussed and obtained an understanding from the management on the key assumptions applied and inputs used in estimating provisions for discounts sales incentives and sales returns and compared the same with the past trends and the provision made by the management. |
| || Selected Samples of rebates and discounts during the year compared them with the supporting documents and performed recalculation of those variable considerations as per scheme documents. |
| || Assessed the relevant disclosure made in the standalone Ind AS financial statement. |
We have determined that there are no other key audit matters tocommunicate in our report.
Information Other than the Standalone Financial Statements andAuditor's Report Thereon
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in Other Section ofAnnual Report but does not include the financial statements and our auditor's reportthereon.
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 identified above and in doing soconsider whether the other information is materially inconsistent with the 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 amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.
Management's Responsibility for the Standalone FinancialStatements
The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these Standalone Ind ASfinancial statements that gives 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 Standardsprescribed under section 133 of the Act.
This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate implementation and maintenance of accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that gives a true and fair viewand are free from material misstatement whether due 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.
The Board of Directors are also responsible for overseeing theCompany's financial reporting process.
Auditor's Responsibilities for the Audit of Standalone FinancialStatements
Our objectives is to obtain reasonable assurance about whether theStandalone Ind AS financial statements as a whole are free from material misstatementwhether due 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 Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of theStandalone Ind AS financial statements whether due to fraud or error design and performaudit procedures responsive to those risks and obtain audit evidence that is sufficientand appropriate 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 controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Companies Act 2013 we are also responsible for expressing our opinion onwhether the company has adequate internal financial control system in place and theoperating effectiveness of such controls.
- Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theability of the Company to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the Ind AS financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.
- Evaluate the overall presentation structure and content of theStandalone Ind AS financial statements including the disclosures and whether theStandalone Ind AS financial statements represent the underlying transactions and events ina manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalonefinancial statements that individually or in aggregate makes it probable that theeconomic decisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.
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 financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
We draw attention to Note 44 to the standalone financial statementregarding the Scheme of Arrangement (Scheme) which has been approved by the NationalCompany Law Tribunal (NCLT) vide its order dated March 25 2021. The Company has giveneffect to the Scheme in the standalone financial statement.
The standalone financial statement of the merged business for theperiod ended March 31 2020 includes financial statement of Ebell Fashion Private Limitedwhich have been audited by another auditor who had expressed unmodified opinion vide theiraudit report dated October 15 2020 has been furnished to us by the management and hasbeen relied upon by us for the purpose of audit of the statement. Our opinion is modifiedin respect of this matter.
Report on Other Legal and Regulatory Requirements
I. 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 and according to the information andexplanations given to us and also on the basis of such checks as we consideredappropriate we give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
II. As required by Section 143(3) of the Act we report that:
i. 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;
ii. In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books;
iii. The Balance Sheet the Statement of Profit and Loss includingOther Comprehensive Income the Statement of Changes in Equity and the Statements of CashFlows dealt with by this report are in agreement with the books of account;
iv. In our opinion the aforesaid standalone financial statementscomply with the Indian Accounting Standards specified under section 133 of the Act readwith rule 7 of the Companies (Accounts) Rules 2014;
v. On the basis of the written representations received from thedirectors as on March 31 2021 and taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2021 from being appointed as a director interms of section 164 (2) of the Act;
vi. With respect to the adequacy of the internal financial controlsover financial reporting of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B".
vii. With respect to the other matters to be included in the Auditor'sReport in accordance with the requirements of section 197(16) of the Act as amended:
In our opinion and to the best of our information and according to theexplanations given to us the remuneration paid by the Company to its directors during theyear is in accordance with the provisions of section 197 of the Act.
viii. With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 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 itsfinancial position in its financial statements (Refer Note no. 32 of the Ind AS financialstatements).
ii. The Company did not have any long term contracts includingderivative contracts for which there were any material foreseeable losses;
iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.
Annexure -A to the independent Auditors' Report
The Annexure referred to in our Independent Auditor's Report to themembers of Lux Industries Limited (the Company') on the standalone Ind AS financialstatements for the year ended on March 31 2021. We report that:
i. (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of itsfixed assets by which fixed assets are verified in a phased manner over a period of threeyears. In accordance with this programme certain fixed assets were verified during theyear and no material discrepancies were noticed on such verification. In our opinion thisperiodicity of physical verification is reasonable having regard to the size of theCompany and the nature of its assets.
(c) According to information and explanation given to us and on thebasis of our examination of the records of the Company the title deeds of immovableproperties are held in the name of the Company.
ii. The inventories have been physically verified during the year bythe management at regular intervals (except for materials lying with third parties whichhave substantially been confirmed by such third parties at the yearend). In our opinionand according to the information and explanations given to us no material discrepancieswere noticed on physical verification.
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. Accordingly paragraph 3(iii)(a)3(iii)(b) and 3(iii)(c) of the Order is 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 with respect to Loans and Advances made guarantee given andinvestment made.
v. According to the information and explanations given to us theCompany has not accepted any deposits from the public.
vi. According to the information and explanation given to us thecentral Govt. of India has not specified the maintenance of cost records under sub section(1) of section 148 of the Act for the product of the company.
vii According to the information and explanations given to us inrespect of statutory dues:
(a) The Company has been regular in depositing undisputed statutorydues including Provident Fund Employees State Insurance Income Tax Service Tax SalesTax Value Added Tax duty of Custom duty of Excise Cess GST and other statutory dueswith the appropriate authorities during the year. According to the information andexplanations given to us no undisputed amounts payable in respect of the aforesaid dueswere outstanding as at March 31 2021 for a period of more than six months from the datethey became payable.
b) According to information and explanations given to us the followingdues of customs income tax service tax sales tax duty of excise and value added taxhave not been deposited by the Company on account of disputes:
|Name of Statute ||Nature of dues ||Amount (Rs in Crores) ||Period to which amount relates ||Forum where the dispute is pending |
|West Bengal Sales Tax Act ||Sales Tax ||0.50 ||2003-04 & 2004-05 ||High Court Kolkata |
|Punjab Vat Act 2005 ||Sales Tax ||0.12 ||2002-03 to 2005-06 ||Deputy Commissioner (Appeal) Ludhiana Excise and Taxation |
|The Finance Act 1994 ||Service Tax ||1.36 ||2007-08 to 2012-13 ||Customs Excise and Service Tax Appellate Tribunal |
|The Central Excise Act 1994 ||Penalty ||3.46 ||2011-12 to 2012-13 ||Deputy Excise and Service Tax Appellate Tribunal |
|The Income Tax Act 1961 ||Income Tax ||0.01 ||2018-19 ||Asst. Commissioner of Income Tax |
|Customs Act 1962 ||Duty Drawback ||0.10 ||2011-12 ||Government of India Ministry of Finance Department of Revenue (Revised Application unit) |
viii. In our opinion and according to information and explanationsgiven by the management we are of the opinion that the Company has not defaulted in therepayment of dues to financial institution and banks. The Company does not have any loansor borrowings from Government and has not issued any debentures.
ix. To the best of our knowledge and belief and according to theinformation and explanations given to us the term loan have been applied by the companyduring the year for the purpose for which they were raised. The Company did not raise anymoney by way of initial public offer or further public offer (including debt instruments)during the year.
x. According to the information and explanations given to us nomaterial fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the year.
xi. According to the information and explanations given to us theCompany has paid/provided for managerial remunerations in accordance with the requisiteapprovals mandated by the provisions of Sec 197 read with Schedule V to the Act.
xii. In our opinion and according to the information and explanationsgiven to us the Company is not a Nidhi company. Accordingly paragraph 3(xii) of theOrder is not applicable.
xiii. According to the information and explanations given to us andbased on our examination of the records of the Company transactions with the relatedparties are in compliance with sections 177 and 188 of the Act where applicable anddetails of such transactions have been disclosed in the standalone Ind AS financialstatements as required by the applicable Indian accounting standards.
xiv. According to the information and explanations given to us andbased on our examination of the records the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
xv. According to the information and explanations given to us and basedon our examination of the records of the Company the Company has not entered intonon-cash transactions with directors or persons connected with them. Accordinglyparagraph 3(xv) of the Order is not applicable.
xvi. The Company is not required to be registered under section 45-IAof the Reserve Bank of India Act 1934.
Annexure -B to the independent Auditors' Report
Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financialreporting of Lux Industries Limited ("the Company") as of March 31 2021 inconjunction with our audit of the standalone Ind AS financial statements of the Companyfor 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 over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India(ICAI'). These responsibilities include the design implementation and maintenanceof adequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls over FinancialReporting (the "Guidance Note") issued by ICAI and the Standards on Auditingissued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act2013 to the extent applicable to an audit of internal financial controls both applicableto an audit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of 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 internal financialcontrols system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A Company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over FinancialReporting
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols
over financial reporting were operating effectively as at March 312021 based on the internal control over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India.
|For S K AGRAWAL AND CO CHARTERED || |
| ||ACCOUNTANTS LLP |
| ||Chartered Accountants |
|Firm Registration No.-306033E/E300272 || |
| ||Sandeep Agrawal |
| ||(Partner) |
|Place: Kolkata ||Membership No. 058553 |
|Dated: May 25 2021 ||UDIN: 21058553AAAABF8700 |