To The Members of Royal Orchid Hotels Limited Report on the Audit of the StandaloneFinancial Statements
We have audited the accompanying standalone financial statements of Royal Orchid HotelsLimited ("the Company") which comprise the Balance Sheet as at March 31 2020the Statement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Cash Flow Statement for the year then ended and a summary ofsignificant accounting policies and other explanatory information. In our opinion and tothe best of our information and according to the explanations given to us the aforesaidstandalone financial statements give the information required by the Companies Act 2013("the Act") in the manner so required and give a true and fair view inconformity with the Indian Accounting Standards prescribed under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended ("IndAS") and other accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2020 and its profit total comprehensive incomethe changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibility for the Audit of the Standalone Financial Statements section of our report.We are independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India (ICAI) together with the ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules made thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. Webelieve that the audit evidence obtained by us is sufficient and appropriate to provide abasis for our audit opinion on the standalone financial statements.
Emphasis of Matter
We draw attention to note 2(b)(ii) of the standalone financial statements which setsout the Company's assessment of the going concern assumption and the financial impact onaccount of the COVID-19 pandemic. Based on these assessments the Management has concludedthat the Company will continue as a going concern and will be able to meet all of itsobligations as well as recover the carrying amount of its assets as on March 31 2020.
Our opinion is not modified in respect of this matter.
Key Audit Matters
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. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Key Audit Matter ||Auditor's Response |
|Impairment of Investments ||Principal Audit Procedures performed: |
|The Management of the Company has carried out impairment assessment for Investments made in one of the subsidiaries of the Company viz. Ksheer Sagar Developers Private Limited owing to recurring losses incurred by the subsidiary. ||(a) Evaluated the design and implementation of relevant controls and the operating effectiveness of such internal controls which inter-alia include the reasonableness of input data considered and assumptions made in determining the fair value of the subsidiary; |
|The standalone financial statements of the Company as at March 31 2020 include Investments of Rs. 3756.18 lakhs Loans (including interest accrued thereon) of Rs.747.19 lakhs current/non-current financial assets of Rs. 246.10 Lakhs (hereinafter collectively referred to as "Investments") made by the Company in this subsidiary. ||(b) Obtained the impairment assessment prepared by the Management and performed the following procedures: |
| ||? Held discussions with the Company/Subsidiary personnel to identify if factors which in our professional judgement should have been considered in the analysis of impairment. |
|Impairment of Investments in the said subsidiary has been identified as a key audit matter due to: ||? Reviewed the source data used for determining the fair value of the subsidiary. |
| The significance of the investments made; and ||? Tested if the fair valuation of the subsidiary considered for the assessment of impairment is as reviewed and approved by the Board of Directors of the Company and the subsidiary. |
| The assessment of the carrying value of the Investments as it involves exercise of significant judgement in determining the fair value of the subsidiary || |
| ||? Assessed the competence independence and objectivity of the management's expert involved in determining fair value of the subsidiary. |
| ||? Involved our internal valuation specialists to test key assumptions considered by the Management in the fair valuation of the subsidiary. |
|Key Audit Matter ||Auditor's Response |
|Evaluation of Management's Assessment of appropriateness of going concern assumption: ||Principal Audit Procedures performed: |
|The evaluation of Management's assessment of going concern assumption and basis of accounting used by the management of the Company in the preparation of its ||Our procedures in relation to evaluation of Management's assessment of the appropriateness of going concern assumption included the following: |
|standalone financial statements is identified as a key audit matter considering the significant impact of COVID-19 pandemic on the hospitality industry in general and the Company. || |
|As disclosed in note 2(b)(ii) to the standalone financial statements the COVID-19 pandemic has led to low occupancies/shutdown of some of the hotels of the Company pan India to comply with the guidelines issued by the Central/State governments. ||(a) Obtained an understanding of the process followed by the Management for the going concern evaluation which includes preparation of cash flow forecasts and liquidity analysis. Evaluated the design and implementation of relevant controls and the operating effectiveness of such internal controls which inter-alia includes reasonableness of the input data considered and assumptions used in preparing the cash flow forecasts for the immediate future. |
|The assessment of appropriateness of going concern assumption by the Management involves significant judgement and estimation of key input variables like average occupancy rate and average room rate and performing sensitivity analysis. || |
| ||(b) Obtained the cash flow forecasts prepared by the Management and performed the following procedures: |
| ||? Tested the inputs and assumptions used in the cash flow forecasts with reference to historical performance internal and external sources of information about the hospitality industry and the Company's strategy. |
| ||? Tested the reasonableness of the cash flows prepared by the Management with reference to various measures undertaken by the Company considering the COVID-19 pandemic. |
| ||? Performed sensitivity analysis on the key input variables used in cash flow forecasts to assess the impact of change on the overall cash flows and if the same are within the tolerable limits. |
Information Other than the Financial Statements and Auditor's Report Thereon
? The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the Board'sreport including Annexures to Board's Report Management Discussion and AnalysisCorporate Governance but does not include the consolidated financial statementsstandalone financial statements and our auditor's report thereon.
? Our opinion on the standalone financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon. ? Inconnection with our audit of the standalone financial statements our responsibility is toread the other information and in doing so consider whether the other information ismaterially inconsistent with the standalone financial statements or our knowledge obtainedduring the course of our audit or otherwise appears to be materially misstated.
? If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income changes in equity of the Company and cash flows in accordancewith the Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatement that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibility for the Audit of the Standalone
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 assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone 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 financial control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the 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
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.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the standalone financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act based on our audit we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit. b) In ouropinion proper books of account as required by law have been kept by the Company so faras it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis Report are in agreement with the books of account. d) In our opinion the aforesaidstandalone financial statements comply with the Ind AS specified under Section 133 of theAct. e) On the basis of the written representations received from the directors as onMarch 31 2020 taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2020 from being appointed as a director in terms of Section164(2) of the Act.
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended in our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of section 197 of the Act. h) With respect to the other matters to beincluded in the Auditor's Report in accordance with Rule 11 of the Companies (Audit andAuditors) Rules 2014 as amended in our opinion and to the best of our information andaccording to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in note 43 of the standalone financial statements ii. The Company did not haveany long-term contracts including derivative contracts for which there were any materialforeseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
|For DELOITTE HASKINS & SELLS LLP ||Chartered Accountants |
|(Firm's Registration No. 117366W/W-100018) ||Monisha Parikh |
| ||Partner |
| ||(Membership No. 47840) |
|BENGALURU ||July 27 2020 |
|UDIN: 20047840AAAACL6289 || |
|MP/SS/YB/2020 || |
ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT (Referred to in paragraph1(f) under Report on Other Legal and Regulatory Requirements' section of our reportof even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of RoyalOrchid Hotels Limited ("the Company") as of March 31 2020 in conjunction withour audit of the standalone financial statements of the Company for the year ended on thatdate.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India.These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company's policies thesafeguarding 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 internal financialcontrols over financial reporting of the Company based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India and the Standards on Auditing prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
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 systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures 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 unauthorised 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 Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2020 based on the criteria forinternal financial control over financial reporting established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
|For DELOITTE HASKINS & SELLS LLP |
|Chartered Accountants |
|(Firm's Registration No. 117366W/W-100018) |
|Monisha Parikh |
|(Membership No. 47840) |
|BENGALURU July 27 2020 |
|UDIN: 20047840AAAACL6289 |
ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT (Referred to in paragraph 2 underReport on Other Legal and Regulatory Requirements' section of our report to TheMembers of Royal Orchid Hotels Limited of even date)
i. In respect of its fixed assets:
a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b. The property plant and equipment are physically verified by the Management inaccordance with a regular programme of verification which in our opinion provides forphysical verification of all the fixed assets at reasonable intervals. According to theinformation and explanations given to us no material discrepancies were noticed on suchverification.
c. In respect of freehold land where the Company has a share of undivided land jointlywith other entities according to the information and explanations given to us and basedon the examination of registered sale deed provided to us we report that the title deedscomprising of such immovable property as at the balance sheet date is held in the name ofthe Company.
In respect of immovable properties constructed on leased land and disclosed asproperty plant and equipment in the financial statements we report that the Company isthe lessee in the lease deed based on confirmation received from the banker with whom thelease deed is pledged .
(ii) As explained to us the inventories were physically verified during the year bythe Management at reasonable intervals and no material discrepancies were noticed onphysical verification.
(iii) According to the information and explanations given to us the Company hasgranted unsecured loans to companies covered in the register maintained under section 189of the Companies Act 2013 in respect of which: a. The terms and conditions of the grantof such loans are in our opinion prima facie not prejudicial to the Company's interest.
b. The schedule of repayment of principal and payment of interest has not beenstipulated and in the absence of such schedule we are unable to comment on the regularityof the repayments or receipts of principal amounts and interest.
c. The schedule of repayment is not stipulated and in the absence of such schedule weare unable to comment on the overdue amount if any remaining outstanding as at thebalance sheet date.
(iv) The Company has not granted any loans that are covered under the provisions ofsection 185 of the Act and provisions of section 186 of the Act in respect to granting ofloans making investments and providing guarantees and securities are not applicable.
(v) According to the information and explanations given to us the Company has notaccepted any deposit during the year and does not have any unclaimed deposits.
(vi) Having regard to the nature of the Company's business / activities reportingunder clause (vi) of the Order 2016 is not applicable.
(vii) According to the information and explanations given to us in respect ofstatutory dues:
a. The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Employees' State Insurance Income-tax Customs Duty Goods andService Tax cess and other material statutory dues applicable to it to the appropriateauthorities.
b. There were no undisputed amounts payable in respect of Provident Fund Employees'State Insurance Income-tax Customs Duty Goods and Services Tax cess and other materialstatutory dues in arrears as at March 31 2020 for a period of more than six months fromthe date they became payable except in case of Tax Deducted at Source of Rs 59.32 lakhswhich is unpaid on account of dispute with the party.
c. Details of dues which have not been deposited as on March 31 2020 on account ofdisputes are given below:
|Name of Statute ||Nature of Dues ||Forum where Dispute is Pending ||Period to which the Amount Relates ||Amou nt (Rs.in lakhs) |
|Income tax Act1961 ||Income Tax ||Income Tax- Appellate ||Financial year 2008-09 ||227.46 |
| || ||Tribunal ||Financial year 2010-11 ||198.74 |
(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in the repayment of loans or borrowings to financialinstitutions and banks. The Company has no borrowings from government and has not issuedany debentures.
(ix) The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) or term loans and hence reporting under clause (ix) ofthe Order is not applicable
(x) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no material fraud on the Company by its officersor employees has been noticed or reported during the year.
(xi) In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.
(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of theOrder is not applicable.
(xiii) In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 188 and 177 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the financial statements etc. as required by theapplicable accounting standards.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause (xiv) of the Order is not applicable to the Company.
(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or persons connected with him and hence provisions of section 192 of theCompanies Act 2013 are not applicable.
(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
|For DELOITTE HASKINS & SELLS LLP |
|Chartered Accountants |
|(Firm's Registration No. 117366W/W-100018) |
|Monisha Parikh |
|(Membership No. 47840) |
|BENGALURU July 27 2020 |
|UDIN: 20047840AAAACL6289 |