To the Members of
Somany Home Innovation Limited
REPORT ON AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
We have audited the standalone financial statements of Somany Home Innovation Limited("the Company") which comprise the Balance sheet as at 31st March2021 and the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Cash Flow and the Statement of Changes in Equity for the year then ended andnotes to the standalone financial statements including a summary of the significantaccounting policies and other explanatory information (herein after referred to as"standalone financial statements").
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 requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at 31st March 2021 and its Profit(including other comprehensive income) changes in equity and its cash flows for the yearended on that date.
BASIS FOR OPINION
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditors Responsibilities for the Audit ofthe Standalone Financial Statements section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (ICAI) together with the ethical requirements that are relevant toour audit of the standalone financial statements under the provisions of the CompaniesAct 2013 and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
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 for the financial yearended March 31 2020. These matters were addressed in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters. We have determined the matters describedbelow to be the key audit matters to be communicated in our report.
|Description of Key Audit Matter ||How our audit addressed the key audit matter |
|1. Sale of Water Heater Business Undertaking || |
|The company has sold its Water Heater Business Undertaking (the "WHBU") being part of Consumer Appliances business of Company to its wholly owned subsidiary M/s. Hintastica Private Limited (the "HPL") by way of slump sale w.e.f. 31st Dec 2021. (Read with note no.53) ||Our audit procedure included checking and review of: |
|Accounting for Provision of tax - capital gain on slump sale to wholly owned subsidiary under the Indian tax laws requires a careful consideration of all facts and circumstances as taxability and exemption depends on fulfilling certain conditions attached to the transfer. ||i) Resolution passed by the Board of Directors of the Company; |
| ||ii) Business Transfer Agreement (BTA) executed between the Company and HPL. |
| ||iii) Share Subscription and Shareholders Agreement ("SSHA") (along with the ancillary agreements) with M/s. Atlantic Societe Francaise De Development Thermique France; and |
| ||iv) Regulatory filings made with various regulators / intermediaries including Stock Exchanges. |
| ||Based on the developments took placed subsequent to the Balance Sheet date i.e. 31st March 2021 whereby the Company ceded its control over HPL (wholly owned subsidiary became Joint venture w.e.f. 20th May 2021) it was considered that the sale of Water Heater Business Undertaking (the "WHBU") to HPL was taxable under the Income Tax Act. Accordingly the company provided Income tax on slump sale of Water Heater Business Undertaking. |
INFORMATION OTHER THAN THE
STANDALONE FINANCIAL STATEMENTS AND AUDITORS REPORT THEREON
The Companys Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Boards Report including Annexures to Boards ReportCorporate Governance and Shareholders Information but does not include thestandalone financial statements and our auditors report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon. In connection with ouraudit of the standalone financial statements our responsibility is to read the otherinformation and in doing so consider whether the other information is materiallyinconsistent with the standalone financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to be materially misstated. If based on the workwe have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
RESPONSIBILITIES OF MANAGEMENT FOR THE STANDALONE FINANCIAL STATEMENTS
The Companys Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 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 (Ind AS) specified under Section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgements and estimates that are reasonable and prudent; and designimplementation 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 financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements the Board of Directors is responsiblefor assessing the Companys ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless the Board of Directors either intends to liquidate the Company or tocease operations or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing the Companys financialreporting process.
AUDITORS RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
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 auditors report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgement 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 control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the Companies Act 2013 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 the reasonableness ofaccounting estimates and related disclosures made by the management.
Conclude on the appropriateness of managements use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the ability ofthe Company to continue as a going concern. If we conclude that a material uncertaintyexists we are required to draw attention in our auditors report to the relateddisclosures in the standalone financial statements or if such disclosures are inadequateto modify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditors report. However future events or conditions may cause theCompany to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation. Materiality is the magnitude of misstatements in the standalone financialstatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the standalone financialstatements.
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 financial year ended 31st March 2021 and are therefore the key auditmatters. We describe these matters in our auditors report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by the Companies (Auditors Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofSection 143 of the Companies Act 2013 we give in the "Annexure_ A" a statementon the matters 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 explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Cash Flow Statement and Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account;
d) In our opinion the aforesaid standalone financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended;
e) On the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the directors is disqualifiedas on March_31_2021 from being appointed as a director in terms of Section 164 (2) of theAct.
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 B". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Companys internal financial controlsover financial reporting.
g) With respect to the other matter to be included in the Auditors report underSection 197(16) as amended:
In our opinion and according to the information and explanation given to us themanagerial remuneration paid/provided during the current year by the Company is inaccordance with the provisions of Section 197 of the Act.
h) With respect to the other matters to be included in the Auditors Report inaccordance with Rule_11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i) The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements Refer Note no. 41 to the financialstatements;
ii) The Company has made provision as required under the applicable law or Indianaccounting standards for material foreseeable losses if any on long-term contractsincluding derivative contracts;
iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company..
For LODHA & CO.
Firm Registration No. 301051E
(N. K. Lodha)
Membership No. 85155
Place: New Delhi
Date: 26th May 2021
Annexure A to the Auditors Report
The Annexure referred to in Independent Auditors Report to the members of theSomany Home Innovation Limited on the standalone financial statements for the year ended31st March 2021 we report that:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assetsby which all fixed assets are verified in a phased manner over a period of three years. Inour opinion this periodicity of physical verification is reasonable having regard to thesize of the Company and the nature of its assets. As per the programme certain fixedassets were physically verified during the year and no material discrepancies were noticedon such verification.
(c) The company is not having any immovable property hence reporting under this clauseis not applicable.
(ii) As per the information and explanation given to us the inventories of the Company(except stock lying with the third parties and goods in transit) have been physicallyverified by the management at reasonable intervals during the year. The discrepanciesnoticed on such physical verification of inventory as compared to book records were notmaterial.
(iii) According to the information and explanations given to us the Company hasgranted unsecured loan to a company covered in the register maintained under section 189of the Companies Act 2013. The company has not granted any loans secured or unsecured tofirms Limited Liability Partnerships or other parties covered in the register maintainedunder Section 189 of the Act.
With respect to the loan given:
(a) According to the information and explanations provided to us and based on the auditprocedures conducted by us the rate of interest and other terms and conditions of loangranted by the company are prima facie not prejudicial to the interest of the company.
(b) According to the information and explanations given to us and based on the auditprocedures conducted by us the loan granted to the company and the interest thereon arerepayable as per contractual terms of the loan agreement. The borrowers have been regularin payment of interest as per the contractual terms.
(c) There are no overdue amounts of more than 90 days in respect of the loan granted bythe company hence reporting under clause 3(iii)(c) of the Order is not applicable to thecompany.
(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act with respectto the loans investments guarantees and security wherever applicable.
(v) The Company has not accepted any deposits from the public within the meaning of thedirective issued by the Reserve Bank of India provision of Section 73 to 76 of the Actany other relevant provisions of the act and rules framed thereunder hence we do notoffer any comment on the same. Further we have been informed that no order has beenpassed by the Company Law Board or National Company Law Tribunal or Reserve Bank of Indiaor any court or any other tribunal in this regard.
(vi) The Central Government has not prescribed the maintenance of cost records undersub-section (1) of Section 148 of the Act for the business carried out by the company.Accordingly the provisions of clause 3(vi) of the Order is not applicable.
(vii) (a) According to the records of the company the company is generally regular indepositing undisputed statutory dues including provident fund employees stateinsurance income tax sales tax goods and service tax custom duty value added taxcess and other material statutory dues with the appropriate authorities to the extentapplicable.
According to the information and explanation given to us there is no undisputed amountpayable in respect of provident fund employees state insurance income tax salestax service tax value added tax goods and service tax cess and other materialstatutory dues as at 31st March 2021 for a period of more than six months fromthe date they became payable except for ` 0.24 lakh of professional tax (since beendeposited).
(b) According to the records and information & explanations given to us there areno dues in respect of income tax or sales tax or service tax or entry tax or duty ofcustom or goods and services tax or duty of excise or central sales tax or value added taxthat have not been deposited with the appropriate authorities on account of any disputeexcept as given below:
|Name of Statute ||Nature of Due ||Period ||Amount involved (In Lakh) || |
Forum where matter is pending
|Finance Act 1994 ||Service Tax ||2013-14 ||37.57 ||The Honble Supreme Court of India |
|Maharashtra VAT Act ||VAT ||2012-13 ||38.54 ||Deputy Commissioner of Sales Tax (Appeal) Kalyan Mumbai |
|Maharashtra CST Act ||CST ||2012-13 ||129.00 ||Deputy Commissioner of Sales Tax (Appeal) Kalyan Mumbai |
|Haryana VAT Act ||VAT ||2016-17 ||266.24 ||Excise and Taxation Department Haryana |
|Haryana CST Act ||CST ||2016-17 ||403.97 ||Excise and Taxation Department Haryana |
|Haryana CST Act ||CST ||2017-18 ||9.83 ||Excise & taxation Officer cum Assessing Authority Gurgaon (South) |
|Gujarat VAT Act ||VAT ||2014-15 ||106.20 ||Deputy Commissioner (Appeal) CCT Ahmedabad Gujarat |
(viii) According to the records of company examined by us and the information andexplanations given to us the Company has not defaulted in repayment of loans orborrowings to any bank or financial institution or government during the year. The Companydid not have any outstanding debentures during the year.
(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments). On the basis of information and explanationgiven to us term loans have been applied for the purposes for which they were obtained.
(x) Based on the audit procedures performed and on the basis of information andexplanations given to us no fraud by the Company or on the Company by its officers oremployees has been noticed or reported during the period covered by our audit.
(xi) On the basis of records and information and explanations made available and basedon our examinations of the records of the company the company has paid / providedmanagerial remuneration in accordance with the requisite approvals mandated under Section197 read with Schedule V of the Act.
(xii) On the basis of information and explanation given to us the Company is not aNidhi Company as prescribed under section 406 of the Companies Act. Accordingly reportingunder clause 3 (xii) of the said order is not applicable.
(xiii) As per the information and explanations and records made available by themanagement of the company and audit procedures performed for the related partytransactions entered during the year the company has complied with the provisions ofsection 177 and 188 of the Act where applicable. As explained and as per the records /details the related party transactions have been disclosed in the standalone financialstatements as required by the applicable accounting standards. (Refer Note no.44)
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly paid convertible debentures and hence reportingunder clause 3 (xiv) of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us and based on ourexamination of the records the Company has not entered into non-cash transactions withdirectors or persons connected with them. Accordingly clause 3(xv) of the Order is notapplicable to the company.
(xvi) According to the information and explanation given to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.Accordingly clause 3(xvi) of the order is not applicable to the company.
For LODHA & CO.
Firm Registration No. 301051E
(N. K. Lodha)
Membership No. 85155
Place: New Delhi
Date: 26th May 2021
Annexure B to the Auditors Report
(Referred to in paragraph 2(f) under Report on Other Legal and RegulatoryRequirements section of our report of 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 Somany HomeInnovation Limited ("the Company") as of March 31 2021 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
MANAGEMENTS RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS
The Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to respective companys 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 internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand 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 auditors judgement including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the internal financial controls system overfinancial reporting of the Company.
MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING
A companys internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of standalone financial statements for external purposes in accordancewith generally accepted accounting principles. A companys internal financial controlover financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of standalone financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the companys assets that could havea material effect on the standalone 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 2021 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
For LODHA & CO.
Firm Registration No. 301051E
(N. K. Lodha)
Membership No. 85155
Place: New Delhi
Date: 26th May 2021