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Parag Milk Foods Ltd.

BSE: 539889 Sector: Agri and agri inputs
NSE: PARAGMILK ISIN Code: INE883N01014
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VOLUME 6470
52-Week high 131.75
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Mkt Cap.(Rs cr) 1,252
Buy Price 0.00
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OPEN 105.50
CLOSE 106.50
VOLUME 6470
52-Week high 131.75
52-Week low 65.50
P/E
Mkt Cap.(Rs cr) 1,252
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Parag Milk Foods Ltd. (PARAGMILK) - Auditors Report

Company auditors report

To the Members of

Parag Milk Foods Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the standalone financial statements of Parag MilkFoods Limited (the ‘Company') which comprise the Balance Sheet as at March31 2022 the Statement of Profit and Loss the Statement of Changes in Equity and theStatement of Cash Flows for the year then ended and notes to the standalone financialstatements including a summary of Significant Policies and other explanatory information.

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 and other accounting principles generally accepted inIndia of the state of affairs of the Company as at March 31 2022 and its loss changesin equity and its cash flows for the year 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 (the ‘ICAI') together with the ethical requirements thatare relevant to our audit of the financial statements under the provisions of the Act andthe 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.

Emphasis of Matter

We draw attention to Note 50 to the standalone financial statementswhich states the management's evaluation of the financial impact on the AccountingCompany due to lockdown and other restrictions on account of covid-19 pandemic situation.Consequent to the assessment by the management the inventories has been written-down byINR 5095.46 million. In addition to the above the Company has concluded the negotiationswith the milk aggregators and based on the Price Settlement Agreement with them hasadjusted the advances amounting to INR 1179.84 million. We draw attention to Note 48(vii)to the standalone financial statements relating to the search carried out under Section132 of the Income Tax Act 1961 in the month of November 2021 concerning the Company andits subsidiary at certain premises/locations. The Company has received a‘Panchanama' dated November 27 2021. As explained to us other than the abovethere was no communication received from the Income Tax Department till the date ofreporting. Our opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most 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.

We have determined the matters described below to be the key auditmatters to be communicated in our report.

Key Audit Matters How our audit addressed the key audit matters
1. Inventory (Refer Note 9 to the standalone financial statements)
The value of inventory is a key audit matter due to involvement of high risk basis the nature of the food industry wherein value per unit is relatively insignificant but high volumes are involved which are dispersed across different point of sales and warehouses. Our audit procedures included and were not limited to the following:
i. Evaluation of the design and testing of the implementation of internal controls relating to physical inventory counts on a test basis;
ii. Performance of test of controls over verification of documentary evidences of controls including the calculation of shrinkages.
iii. Performance of test of details through sample selection of stores as part of the inventory verification program including verification of inventory from floor to documentary evidence and vice versa and verification of shrinkage
2. Valuation and existence of inventory (Refer Note 9 to the standalone financial statements)
Our audit procedures o the valuation and existence of inventories consisted mainly of the following: In order to ascertain the existence of inventories
The inventories of the Company amounted to INR 4681.54 million. we assessed and reviewed the controls implemented and executed by the Company to ensure the existence of inventories. We observed the periodic physical inventory counts. We also performed analytical procedures as well as tests of details of individual transactions.
Our audit of inventories was focused around the risk that there would be a material misstatement relating to the existence of inventories and that the valuation of inventories which involves judgement of the management. As for the valuation of inventories we assessed and reviewed the controls relating to valuation.
According to the standalone financial statements' accounting principles inventories are measured at the lower of cost or net realizable value. The company has procedures for identifying risk for obsolescence inventories based on estimated usage and shelf life of products. For materials and supplies we compared the price recognized in the balance sheet to the latest purchase invoice to ensure that the inventory of materials and supplies is valued in accordance with the accounting policies applied. To address the risk for material error on inventories our audit procedures included amongst other:
Assessing the compliance of company's accounting policies over inventory with applicable accounting standards.
Assessing the inventory valuation processes and practices. On major locations we tested the effectiveness of the key controls.
Assessing the analyses and assessment made by management with respect to slow moving and obsolete stock.
We assessed the adequacy of the company's disclosures related to inventories.
3. Valuation of Trade Receivables (Refer Note 10 to the standalone financial statements)
As at March 31 2022 the trade receivables balance excluding provisions included in Note 10 were Rs 1880.22 million. Our audit procedures included but were not limited to the following :
We have identified valuation of trade receivables as a key audit matter on account of the significant management judgment involved with respect to the recoverability of trade receivables and the provisions for impairment of receivables and the importance of cash collection with reference to the working capital management of the business. (a) Understanding the trade receivables process with regards to valuation and evaluation of controls designed and implemented by the management.
(b) Assessment of the appropriateness of the Company's credit risk policy and obtaining an understanding on management of credit risk.
(c) Control testing:
Obtaining an understanding on credit approvals establishing credit limits and continuous monitoring of creditworthiness of customers to which the Company grants the credit in normal course of business.
Obtaining understanding on how the Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade receivables.
(d) Tests of details:
We have checked the ageing analysis on a sample basis and subsequent receipt of the trade receivables to the source documents including bank statements;
We have verified the underlying supporting documents like acceptance of invoices along with various correspondence carried out by the management of the Company with trade receivable for realization of money;
We have verified open invoices duly accepted by customers in order to ensure existence of trade receivables;
We have verified the appropriateness of judgments regarding provisions for trade receivables and assessment as to whether these provisions were calculated in accordance with the Company's provisioning policies.
We have conducted discussion with management as to the recoverability of the old outstanding and corroborating management's explanations with underlying documentation and correspondence with the customers.
4. Revenue Recognition (Refer Note 24 to the standalone financial statements)
The revenue of the Company consists primarily of sale of food products that are sold through distributors modern trade and direct sale channels amongst others. Revenue is recognized when the control of products is transferred to the customer and there is no unfulfilled obligation. Our key audit procedures around revenue recognition included but were not limited to the following:
Owing to the volume of sales transactions size of the distribution network and varied terms of contracts with customers revenue is determined to be an area involving significant risk in line with the requirements of the Standards on Auditing and hence requiring significant auditor attention. The management is required to make certain key judgements around determination of transaction price in accordance with the requirements of Ind AS 115 Revenue from Contracts with Customers on account of consideration payable to customers in the form of various discount schemes returns and rebates. The Company and its external stakeholders focus on revenue as a key performance indicator and this could create an incentive for revenue to be overstated or recognised before control has been transferred. • Assessed the appropriateness of the revenue recognition accounting policies of the Company including those relating to rebates and trade discounts by evaluating compliance with the applicable accounting standards.
• Evaluated the design and tested the operating effectiveness of the relevant key controls with respect to revenue recognition including general and specific information technology controls.
• Performed substantive testing on selected samples of revenue transactions recorded during the year by testing the underlying documents including contracts invoices goods dispatch notes shipping documents and customer receipts wherever applicable
Considering the aforesaid significance to our audit and the external stakeholders revenue recognition has been considered as a key audit matter for the current year's audit. • Understood and evaluated the Company's process for recording of the accruals for discounts and rebates and ongoing incentive schemes and on a test basis verified the year-end provisions made in respect of such schemes.
• Performed analytical review procedures on revenue recognised during the year to identify any unusual and/or material variances.
• Performed confirmation and alternative procedures on selected invoices outstanding as at the year end.
• Tested a select sample of revenue transactions recorded before the financial year end date to determine whether the revenue has been recognised in the appropriate financial period.
• Tested a sample of manual journal entries posted to revenue ledgers to identify any unusual items.
• Evaluated the appropriateness and adequacy of disclosures in the consolidated financial statements in respect of revenue recognition in accordance with the applicable requirements.

Information Other than the Financial Statements and Auditor'sReport Thereon

The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the Board'sReport including Annexures to Board's Report Management Discussion and AnalysisBusiness Responsibility Report Corporate Governance Report and Shareholder'sInformation but does not include the standalone financial statements and ourauditor'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 during the audit or otherwise appears to be materially misstated.If based on the work we have performed we conclude that there is a material misstatementof this other information we are required to report that fact. We have nothing to reportin 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 Indian AccountingStandards specified under Section 133 of the Act. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding 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.

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 professional judgment and maintainprofessional skepticism 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 control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. UnderSection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls 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 thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the standalone financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may cause the Company to cease to continue as a going concern; and

• Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves 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 period 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 2020(the ‘Order') issued by the Central Government of India in terms of Section143(11) of the Act we give in the Annexure ‘A' a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.

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 the Statementof Changes in Equity and the Statement of Cash Flows dealt with by this Report are inagreement 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 March 31 2022 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2022 from being appointed as a director in termsof Section 164(2) of the Act;

(f) 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';

(g) with respect to the other matters to be included in theAuditor's Report in accordance with the Section 197(16) of the Act in our opinionand according to the information and explanations given to us the remuneration paid bythe Company to its directors during the current year is in accordance with the provisionsof Section 197 of the Act. The remuneration paid to any director is not in excess of thelimit laid down under Section 197 of the Act. Further the Ministry of Corporate Affairshas not prescribed other details under aforesaid section which are required to becommented upon by us; and

(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 39 to the standalonefinancial 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;

(iv) (a) the management of the Company has represented that to thebest of its knowledge and belief other than as disclosed in the notes to the standalonefinancial statements during the year no funds have been advanced or loaned or invested(either from borrowed funds or share premium or any other sources or kind of funds) by theCompany to or in any other person or entity including foreign entities (the‘Intermediaries') with the understanding whether recorded in writing orotherwise that the intermediary shall whether directly or indirectly lend or invest inother persons or entities identified in any manner whatsoever by or on behalf of theCompany (the ‘Ultimate Beneficiaries') or provide any guarantee security or thelike on behalf of the Ultimate Beneficiaries;

(b) the management of the Company has represented that to the best ofits knowledge and belief other than as disclosed in the notes to the standalone financialstatements during the year no funds have been received by the Company from any person orentity including foreign entities (the ‘Funding Parties') with theunderstanding whether recorded in writing or otherwise that the Company shall whetherdirectly or indirectly lend or invest in other persons or entities identified in anymanner whatsoever by or on behalf of the Funding Party (the ‘UltimateBeneficiaries') or provide guarantee security or the like on behalf of the UltimateBeneficiaries; and (c) based on such audit procedures we have considered reasonable andappropriate in the circumstances that nothing has come to our notice that has caused us tobelieve that the representations under paragraph (a) and (b) above contain any materialmisstatement.

(v) the Company neither declared nor paid dividend during the year.Accordingly the Company is not required to comply with Section 123 of the Act.

ANNEXURE ‘A' TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1 of our report of even date)

(i) (a) (A) The Company is maintaining proper records showing fullparticulars including quantitative details and situation of property plant andequipment except for certain property plant and equipment where quantitative details arenot available since inception;

(B) The Company is maintaining records showing full particulars ofintangible assets;

(b) According to the information and explanations to us during theyear the property plant and equipment of the Company have been physically verified bythe management except as stated in Paragraph (A)(a) above and no material discrepancieswere noticed on such verification. In our opinion the frequency of verification isreasonable having regard to the size of the Company and the nature of its assets;

(c) The title deeds of all the properties (other than properties wherethe Company is the lessee and the lease agreements are duly executed in favour of lessee)disclosed in the standalone financial statements are held in the name of the Company;

(d) The Company has not Property Plant and Equipment (including Rightof Use assets) and Intangible Assets during the year. Accordingly the Paragraph 3(i)(d)of the Order is not applicable to the Company;

(e) No proceedings have been during the year or are pending against theCompany as at March 31 2022 for holding any benami property under the Benami Transactions(Prohibition) Act 1988 (as amended in 2016) and rules made thereunder. Accordingly theParagraph 3(i)(e) of the Order is not applicable to the Company.

(ii) (a) The management has conducted physical verification ofinventory at reasonable intervals during the year except for goods-in-transit and stockslying with third parties. For stocks lying with third parties at the year end writtenconfirmations have been obtained by the management. In our opinion the coverage andprocedure of such verification by the management is appropriate. No discrepancies werenoticed on physical verification carried out during the year except that a one time writeoff of inventories was done at the year end owing to its perishable nature change ingovernment policies with respect to restriction on use of specific raw material usage inproducts thereby leading to non moving stock. Further such stock held was evaluated asspoilage under the lab test done by an Independent party and was declared as not fit forfurther consumption in products; and

(b) T he Company has not obtained any sanctioned working capital limitduring the year from banks and/or financial institutions on the basis of security ofcurrent assets. However the Company has issued secured foreign currency convertible bonds(FCCB) and unsecured non convertible debentures (NCD) to International FinanceCorporation(IFC) which is to be utilised towards working capital requirements.

There is no requirement of submission of quarterly returns orstatements to be filed with IFC and hence the agreement of stock return/statements withbooks of accounts is not applicable. Accordingly the Paragraph 3(ii)(b) of the Order isnot applicable to the Company.

(iii) (a) During the year the Company has not made investments inprovided any guarantee or security or granted any loans or advances in the nature ofloans secured or unsecured to companies its firms Limited Liability Partnerships orany other parties. Accordingly the Paragraph 3(iii)(a) to (f) of the Order is notapplicable to the Company. (iv) The Company has complied with the provisions of Sections185 and 186 of the Act in respect of grant of loans making investments and providingguarantees and securities as applicable.

(v) The Company has not accepted any deposits or amounts which aredeemed to be deposits from the public during the year to which the directives issued bythe Reserve Bank of India and the provisions of Sections 73 to 76 and other relevantprovisions of the Act and the rules framed thereunder apply. Accordingly the Paragraph3(v) of the Order is not applicable to the Company.

(vi) The maintenance of cost records has been specified by the CentralGovernment under sub-section (1) of section 148 of the Act and rules thereunder. We havebroadly reviewed such records and are of the opinion that prima facie the prescribedaccounts and records have been made and maintained. We have however not made a detailedexamination of the cost records with a view to determine whether they are accurate orcomplete.

(vii) ( Thea)Company is generally regular in depositing with theappropriate authorities undisputed statutory dues including Goods and Services tax (GST)provident fund employees' state insurance income-tax sales-tax service tax dutyof customs duty of excise value added tax cess and any other material statutory duesapplicable to it though there has been a slight delay in a few cases except an amount ofRs.0.92 million pertaining to income tax deducted at source for the month of January 2021which has not been paid till the date of our report. During the year 2017-18 sales taxvalue added tax service tax and duty of excise subsumed in GST and are accordinglyreported under GST. No undisputed amounts payable in respect of provident fundemployees' state insurance income tax GST customs duty cess and any othermaterial statutory dues applicable to it were outstanding at the year end for a periodof more than six months from the date they became payable

(b) The dues outstanding with respect to provident fundemployees' state insurance income tax GST sales tax service tax value added taxcustoms duty excise duty and cess on account of any dispute are as follows.

Name of the statute Nature of the dues Amount INR in Million Period to which the amount relates Forum where dispute is pending
The Central Goods and Service Tax Act Goods and Service Tax 7.85 FY 2019-20 Commissioner of GST and Central Excise
Central Sales Tax Act 1956 Central Sales Tax 6.50 01-Jun-17 Commissioner of Sales Tax
Income Tax Act 1961 Income Tax 57.46 AY 2012-13 Assessement Order has been received
Income Tax Act 1961 Income Tax 47.36 AY 2013-14 Commissioner of Income Tax (Appeals) Income Tax Appellate Tribunal appeal to be filed
Income Tax Act 1961 Wealth Tax 0.08 AY 2014-15 Response to be filed
Income Tax Act 1961 Income Tax - AY 2015-16 Rectification of mistake to be filed - Refund adjusted
Income Tax Act 1961 Income Tax 39.25 AY 2016-17 Appeal to be filed
Income Tax Act 1961 Income Tax 11.17 AY 2017-18 Assessement Order has been received
Income Tax Act 1961 Income Tax 21.27 AY 2018-19 Appeal has been filed scrutiny has been in process
Income Tax Act 1961 Income Tax 2.45 AY 2019-20 Letter of Intimation has been received
Income Tax Act 1961 Income Tax 113.07 AY 2020-21 Assessement Order has been received
Maharashtra Value Added Tax Act 2002 Duty and Penalty 34.41 FY 2009-10 Joint Commissioner of Sales Tax (App)-1
Maharashtra Value Added Tax Act 2002 Duty and Penalty - FY 2010-11 Joint Commissioner of Sales Tax (App)-1
Maharashtra Value Added Tax Act 2002 Duty and Penalty 2.10 FY 2016-17 Joint Commissioner of Sales Tax (App)-1
Maharashtra Value Added Tax Act 2002 Duty and Penalty 1.08 FY 2017-18 Joint Commissioner of Sales Tax (App)-1
Central Sales Tax Act 1956 Duty and Penalty 7.79 FY 2009-10 Joint Commissioner of Sales Tax (App)-1
Central Sales Tax Act 1956 Duty and Penalty 1.29 FY 2016-17 Joint Commissioner of Sales Tax (App)-1
Central Sales Tax Act 1956 Duty and Penalty 3.65 FY 2017-18 Joint Commissioner of Sales Tax (App)-1

(viii) There are no transactions relating to previously unrecordedincome that have been surrendered or disclosed as income during the year in the taxassessments under the Income Tax Act 1961. Accordingly the Paragraph 3(viii) of theOrder is not applicable to the Company

(ix) (a) According to the information and explanations given to us andon the basis of our audit procedures the Company has not defaulted in repayment of loansor other borrowings or in the payment of interest thereon to any lender;

(b) According to the information and explanations given to us and onthe basis of our audit procedures the Company has not been declared wilful defaulter byany bank or financial institution or government or any government authority;

(c) According to the information and explanations given to us theCompany has prima facie utilized the money obtained by way of term loans during the yearfor the purposes for which they were obtained;

(d) According to the information and explanations given to us and theprocedure performed by us and on an overall examination of the financial statements of theCompany we report that no funds raised on short-term basis have prima facie been usedfor long-term purposes by the Company;

(e) According to the information and explanations given to us on anoverall examination of the financial statements of the Company the Company has not takenany funds from any entity or person on account of or to meet the obligations of itssubsidiary as defined under the Act. The Company does not have a joint venture; and

(f) According to the information and explanations given to us theCompany has not raised any loans during the year on the pledge of securities held in itssubsidiary as defined under the Act. The Company does not have a joint venture.

(x) (a) According to the information and explanations given to us wereport that the Company has not raised monies by way of initial public offer or furtherpublic offer (including debt instruments) during the year. Accordingly the Paragraph 3(x)(a) of the Order is not applicable to the Company; and

(b) According to the information and explanations given to us theCompany has made preferential allotment or private placement of shares or convertibledebentures (fully partially or optionally convertible) during the year and in ouropinion the requirements of Section 42 and Section 62 of the Act have been complied withand the funds raised have been used for the purposes for which they were raised.

(xi) (a) During the course of our examination of the books and recordsof the Company carried out in accordance with the generally accepted auditing practicesin India and according to the information and explanations given to us we have neithercome across any instance of fraud by the Company nor any fraud on the Company has beennoticed or reported during the year nor have we been informed of any such instance by themanagement;

(b) According to the information and explanations given to us and onthe basis of our audit procedures no report under Section 143(12) of the Act has beenfiled in Form ADT-4 as prescribed under Rule 13 of Companies (Audit and Auditors) Rules2014 with the Central Government during the year and upto the date of this report; and

(c) According to the information and explanations given to us thereare no whistle blower complaints received by the Company during the year and upto the dateof this report.

(xii) The Company is not a Nidhi Company. Accordingly the Paragraph3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and onthe basis of our audit procedures all transactions entered into by the Company with therelated parties are in compliance with sections 177 and 188 of the Act where applicableand the details have been disclosed in the standalone financial statements as required bythe applicable accounting standards.

(xiv) (a) According to the information and explanations given to usthe Company has adequate internal audit system commensurate with the size and the natureof its business; and

(b) We have considered the internal reports for the year under auditissued to the Company during the year and till date in determining the nature timing andextent of our audit procedures.

(xv) Accordingtotheinformationandexplanations given to us and in ouropinion the Company during the year has not entered into any non-cash transactions withdirectors or persons connected with its directors and accordingly the provisions ofSection 192 of the Act is not applicable. Accordingly the Paragraph 3(xv) of the Order isnot applicable to the Company.

(xvi) (a) The Company is not required to be registered under Section45-IA of the Reserve Bank of India Act 1934. Accordingly the Paragraph 3(xvi)(a) of theOrder is not applicable to the Company;

(b) According to the information and explanations given to us and inour opinion the Company has not conducted Non-Banking Financial or Housing Financeactivity. Accordingly the Paragraph 3(xvi)(b) of the Order is not applicable to theCompany;

(c) According to the information and explanations given to us and inour opinion the Company is not a Core Investment Company (CIC) as defined in theregulations made by the Reserve Bank of India; and

(d) According to the information and explanations given to us theGroup to which the Company belongs has no CIC as part of the Group. (xvii) According tothe information and explanations given to us the Company has incurred cash losses for thecurrent financial year amounting to Rs.4292.11 million. However no cash losses wereincurred in the immediately preceding financial year. (xviii) According to the informationand explanations given to us there has been no resignation of statutory auditors duringthe year. Accordingly the Paragraph 3(xviii) of the Order is not applicable to theCompany.

(xix) Accordingto the information and explanations given to us and onthe basis of the financial ratios ageing and expected dates of realisation of financialassets and payment of financial liabilities other information accompanying the financialstatements our knowledge of the Board of Directors and management plans and based on ourexamination of the evidence supporting the assumptions nothing has come to our attentionwhich causes us to believe that any material uncertainty exists as on the date of theaudit report that Company is not capable of meeting its liabilities existing as at thedate of balance sheet as and when they fall due within a period of one year from thebalance sheet date. We however state that this is not an assurance as to the futureviability of the Company. We further state that our reporting is based on the facts uptothe date of the audit report and we neither give any guarantee nor any assuarnace that allliabilities falling due within a period of one year from the balance sheet date will getdischarged by the Company as and when they fall due.

(xx) (a) There are no unspent amounts towards Corporate SocialResponsibility on other than ongoing projects requiring a transfer to a Fund specified inSchedule VII to the Act in compliance with second proviso to Section 135(5) of the Act.Accordingly the Paragraph 3(xx)(a) of the Order is not applicable to the Company; and

(b) There are no unspent amounts towards Corporate SocialResponsibility ongoing projects requiring a transfer to a Special account in compliancewith the provisions of Section 135(6) of the said Act. Accordingly the Paragraph 3(xx)(b) of the Order is not applicable to the Company.

ANNEXURE ‘B' TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 2(f) of our report of even date)

Report on the Internal Financial Controls under Section 143(3)(i) ofthe Companies Act 2013 (the ‘Act')

We have audited the internal financial controls over financialreporting of Parag Milk Foods Limited (the ‘Company') as of March 312022 in conjunction with our audit of the standalone 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 (the ‘Guidance Note') issued by the Institute of CharteredAccountants of India (the ‘ICAI'). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to Company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under the Act.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company'sinternal financial controls over financial reporting based on our audit. We conducted ouraudit in accordance with the Guidance Note and the Standards on Auditing issued by theICAI and deemed to be prescribed under Section 143(10) of the Act to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the ICAI. 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 overfinancial reporting was established and maintained and if such controls operatedeffectively in all material respects. Our audit involves performing procedures to obtainaudit evidence about the adequacy of the internal financial controls system over financialreporting and their operating effectiveness. Our audit of internal financial controls overfinancial reporting included obtaining an understanding of internal financial controlsover financial reporting assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgment includingthe assessment of the risks of material misstatement of the financial statements whetherdue to fraud or error. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion on the Company's internalfinancial controls system over financial reporting.

Meaning of internal financial controls over financial reporting

A company's internal financial control over financial reporting isa process 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 controlover financial 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 expenditure 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 to 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.

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 system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2022 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note issued by theICAI.

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