To the Members of Mac Charles (India) Limited.
Report on the Audit of the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of Mac Charles(India) Limited
(the Company') which comprise the Balance Sheet as at 31 March 2021 theStatement of Profit and Loss (including Other Comprehensive Income) the Statement of CashFlow and the Statement of Changes in Equity for the year then ended and a summary of thesignificant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information required bythe Companies Act 2013 (Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India including
Indian Accounting Standards (Ind AS') specified under section 133 of the Act ofthe state of affairs of the Company as at 31 March 2021 and its profit (including othercomprehensive income) its cash flows and the changes in equity for the year ended on thatdate.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered
Accountants of India (ICAI') together with the ethical requirements that arerelevant to our audit of the standalone financial statements under the provisions of theAct and the rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.
Key Audit Matters
4. Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.
5. We have determined the matters described below to be the key audit matters to becommunicated in our report.
|Key audit matters ||How the matter was addressed in our audit |
|Impairment assessment of investments and loans in subsidiaries ||Our audit procedures included but were not limited to the following: |
|The Company's policies on the impairment assessment of the investments and loans is set out in note 3.4 and note 3.6 respectively to the standalone financial statements. ||Obtained an understanding of the management process for identification of possible impairment indicators and process followed by the management for impairment testing. |
|As detailed in Note 7 to the financial statements as at 31 March 2021 the carrying values of Company's investment in its subsidiaries amounts to 2109.6 million. Further as detailed for Note 17 to the financial statements as at 31 March 2021 loans given to subsidiaries amount to 517.02 million Impairment assessment of these investments and loans is considered as a significant risk as there is a risk that recoverability of the investments and loans could not be established and potential impairment charge might be required to be recorded in the standalone financial statements. The recoverability of these investments is inherently subjective due to reliance on net worth of investee land valuations of the properties held and cash flow projections of these investee companies. ||Understood evaluated and tested controls around management's assessment of the impairment indicators and the testing performed. |
|The above impairment test has not resulted in recognition of any impairment loss during the period. ||Compared the carrying value of investments made and loans given to the net assets of the underlying entity to identify whether the net assets being an approximation of their minimum recoverable amount were in excess of their carrying amount. |
|Investment in subsidiaries and loans given to subsidiaries is identified as a key audit matter considering the significance of the balance recoverability risks and involvement of significant judgment and assumptions. ||Wherever the net assets were lower than the recoverable amount for material amounts: |
| ||We obtained and verified the valuation of land parcels and the properties of these entities done by management's expert as per the government prescribed circle rates and prevalent market rate. Considered the independence competence and objectivity of management's external specialist involved in determination of the valuation. |
| ||Involved auditor's expert to independently assess such fair values as provided by the management. |
| ||Obtained and verified the management certified cash flow projections for the projects and tested the underlying assumptions used by the management in arriving at those projections. |
| ||Determined the appropriateness of the valuation methodology applied in determining the fair valuation of the assets of the subsidiaries. |
| ||Challenged the managements on the underlying assumptions used for the cash flow projections considering evidence available to support these assumptions and our understanding for the business. |
| ||We have discussed with management and obtained and reviewed the support letter from the Holding Company Embassy Property Developments Private Limited confirming that they would continue to infuse funds / capital into the subsidiaries Blue Lagoon Real Estate Private Limited and Neptune Real Estate Private Limited as and when required for the expansion of business / working capital / repayment of loans to Mac Charles (India) Limited. |
| ||Assessed the appropriateness and adequacy of the disclosures made by the management for the impairment losses recognized in accordance with applicable accounting standards |
|Evaluation of Going concern assumption ||Our audit procedures related to revenue recognition included but were not limited to the following: |
|The Company has incurred loss amounting to ||We obtained and evaluated management's assessment of going concern. |
|9.44 million (after reducing non-recurring profit on sale of property plant and equipment) from continuing operations for the year ended 31 March 2021. The Company has discontinued its hotel operations with effect from 01 November 2019 and is in the process of demolishing the building of Le Meridien Hotel with a plan to construct a commercial building in its place. ||We obtained an understanding of the key assumptions underlying the Company's forecasts and assessed whether they are appropriate considering the Company's historical performance and the current market conditions. |
|The financial statements of the Company have been prepared by the management on a going concern basis based on an assessment of the Company's free cash flow forecast from its continuing operations to operate as a going concern for next twelve months from the date of balance sheet. ||We evaluated the availability of sources of funding and access to additional lines of credit. |
| ||We have obtained and verified management's sensitivity analysis of the cash flow forecasts and their arithmetical accuracy. |
|The board of directors of the Company has approved selling off of certain properties of the Company classified as Asset held for sale' as further detailed in Note 41 of the financial statements. ||We assessed the recoverability of loans granted the Company to its subsidiaries. |
|We have identified the assessment of Company's ability to continue as a going concern as a key audit matter since this assessment is dependent on certain management assumptions and judgments in particular in relation to future cash flows to be generated from ||We have obtained and reviewed the support letter from the Holding Company Embassy Property Development Private Limited confirming that they have the ability and the willingness to infuse capital / funds into the Company as and when required to enable the Company to meet its obligations and continue its operations in the foreseeable future. |
|the Company's continuing operations and the ability of the Company to renew or obtain financing facilities to construct commercial spaces as and when necessary. ||Assessed the appropriateness and adequacy of disclosures in the financial statements of the Company relating to the going concern assumption. |
Information other than the Standalone Financial Statements and Auditor's Report thereon
6. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe standalone financial statements and our auditor's report thereon. Our opinion on thestandalone financial statements does not cover the other information and we do not expressany form of assurance conclusion thereon. In connection with our audit of the standalonefinancial statements our responsibility is to read the other information and in doingso consider whether the other information is materially inconsistent with the standalonefinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially 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 for the StandaloneFinancial Statements
7. The accompanying standalone financial statements have been approved by the Company'sBoard of Directors. 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 financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including the IndAS specified under section 133 of the Act. This responsibility also includes maintenanceof adequate accounting records in accordance with the provisions of the Act forsafeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate 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 standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.
8. In preparing the standalone financial statements management is responsible forassessing the
Company's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
9. Those Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the
Standalone Financial Statements
10. Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with Standards on Auditing will always detect a materialmisstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if individually or in the aggregate they could reasonably beexpected to influence the economic decisions of users taken on the basis of thesestandalone financial statements. 11. As part of an audit in accordance with Standards onAuditing we exercise professional judgment and maintain professional skepticismthroughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control;
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to standalone financial statements inplace 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 the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern; and
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation; 12. We communicate with those charged with governance regarding among othermatters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit. 13. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards. 14. From the matterscommunicated with those charged with governance we determine those matters that were ofmost significance in the audit of the standalone financial statements of the currentperiod and are therefore the key audit matters. We describe these matters in our auditor'sreport unless law or regulation precludes public disclosure about the matter or when inextremely rare circumstances we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.
15. The standalone financial statements of the
Company for the year ended 31 March 2020 were audited by the predecessor auditor B S R& Associates LLP who have expressed an unmodified opinion on those standalonefinancial statements vide their audit report dated 26 June 2020.
Report on Other Legal and Regulatory Requirements
16. As required by section 197(16) of the Act based on our audit we report that theCompany has paid remuneration to its directors during the year in accordance with theprovisions of and limits laid down under section 197 read with Schedule V to the Act. 17.As required by the Companies (Auditor's Report)
Order 2016 (the Order') issued by the Central
Government of India in terms of section 143(11) of the Act we give in the Annexure I astatement on the matters specified in paragraphs 3 and 4 of the Order. 18. Further to ourcomments in Annexure I as required by section 143(3) of the Act based on our audit wereport to the extent applicable that:
a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit of theaccompanying standalone financial statements;
b) in our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c) The standalone financial statements dealt with by this report are in agreement withthe books of account;
d) in our opinion the aforesaid standalone financial statements comply with Ind ASspecified under section 133 of the Act;
e) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2021 from being appointed as a director in terms of section 164(2) of the Act;
f) we have also audited the internal financial controls with reference to standalonefinancial statements of the Company as on 31 March 2021 in conjunction with our audit ofthe standalone financial statements of the Company for the year ended on that date and ourreport dated 03 June 2021 as per Annexure II expressed unmodified opinion; and
g) 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 does not have any pending litigations which would impact its financialposition as at 31 March 2021;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at 31 March 2021;
iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended 31 March2021; and iv. the disclosure requirements relating to holdings as well as dealings inspecified bank notes were applicable for the period from 8 November 2016 to 30 December2016 which are not relevant to these standalone financial statements. Hence reportingunder this clause is not applicable.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 215834
Date: 03 June 2021
Annexure I to the Independent Auditor's Report of even date to the members of MacCharles (India) Limited on the standalone financial statements for the year ended31 March 2021 Based on the audit procedures performed for the purpose of reporting atrue and fair view on the standalone financial statements of the Company and taking intoconsideration the information and explanations given to us and the books of account andother records examined by us in the normal course of audit and to the best of ourknowledge and belief we report that:
i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment. (b) The Company has aregular program of physical verification of its property plant and equipment under whichproperty plant and equipment are verified every year which in our opinion is reasonablehaving regard to the size of the Company and the nature of its assets. In accordance withthis program property plant and equipment were verified during the year and no materialdiscrepancies were noticed on such verification.
(c) The title deeds of all the immovable properties (which are included under the headProperty plant and equipment investment property and asset held for sale) are held inthe name of the Company.
ii) The Company does not have any inventory. Accordingly the provisions of clause3(ii) of the Order are not applicable.
iii) The Company has granted interest free unsecured loans to companies covered in theregister maintained under Section 189 of the Act; and with respect to the same:
(a) in our opinion the terms and conditions of grant of such loans are not primafacie prejudicial to the Company's interest.
(b) the schedule of repayment of principal has been stipulated wherein the principalamounts are repayable on demand and since the repayment of such loans has not beendemanded in our opinion repayment of the principal amount is regular.
(c) there is no overdue amount in respect of loans granted to such Companies.
iv) In our opinion the Company has not entered into any transaction covered underSections 185 and 186 of the Act. Accordingly the provisions of clause 3(iv) of the Orderare not applicable.
v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
vi) The Central Government has not specified maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of
Company's services. Accordingly the provisions of clause 3(vi) of the Order are notapplicable. vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax goods and services tax duty of customs value added tax cess andother material statutory dues as applicable have generally been regularly deposited tothe appropriate authorities. Further no undisputed amounts payable in respect thereofwere outstanding at the year-end for a period of more than six months from the date theybecame payable.
(b) There are no dues in respect of income-tax goods and services tax duty of customsand value added tax that have not been deposited with the appropriate authorities onaccount of any dispute.
viii) The Company has not defaulted in repayment of loans or borrowings to any bank orfinancial institution during the year. The Company did not have any outstanding borrowingfrom government and debentures during the year. ix) In our opinion the Company hasapplied money raise moneys by way of term loan for the purpose for which they were raised.The Company did not raise moneys by way of initial public offer or further public offer(including debt instruments).
x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.
xi) Managerial remuneration has been paid and provided by the Company in accordancewith the requisite approvals mandated by the provisions of Section 197 of the Act readwith Schedule V to the Act.
xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.
xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable Ind AS.
xiv)During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.
xv) In our opinion the Company has not entered into any non-cash transactions with thedirectors or persons connected with them covered under Section 192 of the Act.
xvi)The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
Annexure II to the Independent Auditor's Report of even date to the members of MacCharles (India) Limited on the standalone financial statements for the year ended 31 March2021
Independent Auditor's report on the internal financial controls with reference to thefinancial statements under clause (i) of sub-section 3 of
Section 143 of the Companies Act 2013 (the Act')
1. In conjunction with our audit of the standalone financial statements of Mac Charles(India) Limited (the Company') as at and for the year ended 31
March 2021 we have audited the internal financial controls with reference tostandalone financial statements of the Company as at that date.
Responsibilities of Management for Internal Financial Controls
2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal financial controls 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 the Company's business including adherenceto the Company'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 Act.
Auditor's Responsibility for the Audit of the
Internal Financial Controls with Reference to Standalone Financial Statements
3. Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to standalone financial statements based on our audit. Weconducted our audit in accordance with the Standards on Auditing issued by the
Institute of Chartered Accountants of India (ICAI') prescribed under Section143(10) of the Act to the extent applicable to an audit of internal financial controlswith reference to financial statements and the Guidance Note on Audit of InternalFinancial
Controls Over Financial Reporting (the Guidance Note') issued by the ICAI. ThoseStandards and the
Guidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlswith reference to standalone financial statements were established and maintained and ifsuch controls operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls with reference to standalone financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference tostandalone financial statements includes obtaining an understanding of such internalfinancial controls assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the standalone financial statementswhether due to fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to standalone financial statements.
Meaning of Internal Financial Controls with Reference to Standalone FinancialStatements
6. A company's internal financial controls with reference to standalone financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of standalone financial statements for externalpurposes in accordance with generally accepted accounting principles. A company's internalfinancial controls with reference to standalone financial statements include thosepolicies and procedures that (1) pertain to the maintenance of records that in reasonabledetail accurately and fairly reflect the transactions and dispositions of the assets ofthe company; (2) provide reasonable assurance that transactions are recorded as necessaryto permit preparation of standalone 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 timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the standalone financial statements.
Inherent Limitations of Internal Financial Controls with Reference to StandaloneFinancial Statements
7. Because of the inherent limitations of internal financial controls with reference tostandalone 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 standalone financial statements to future periods are subjectto the risk that the internal financial controls with reference to standalone financialstatements may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.
8. In our opinion the Company has in all material respects adequate internalfinancial controls with reference to standalone financial statements and such controlswere operating effectively as at 31 March 2021 based on the internal financial controlswith reference to standalone financial statements criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls over Financial Reporting issued by the Institute ofChartered Accountants of India .
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 215834
Date: 03 June 2021