To the Members of
Zydus Wellness Limited
Report on the Audit of the Standalone Financial Statements Opinion
We have audited the accompanying Standalone financial statements of Zydus WellnessLimited (the Company') which comprise the balance sheet as at March 31 2021 thestatement of Profit and Loss (including other comprehensive income) the statement ofchanges in equity and the statement of cash flows for the year then ended and notes tothe Standalone financial statements including a summary of significant accountingpolicies and other explanatory information.
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 true andfair view in conformity with the Indian Accounting Standards prescribed under section 133of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended(Ind AS') and other accounting principles generally accepted in India of the stateof affairs of the Company as at March 31 2021 and its loss total comprehensive incomecash flows and the changes in equity 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 (SAs') specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone financial statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI') together with the ethicalrequirements that are relevant to our audit of the Standalone financial statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion on the standalone financial statements.
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 currentyear/period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon 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.
|Sr. No. Key Audit Matter ||Auditor's Response |
|1 Assessment of impairment of Goodwill amounting to Rs.2282 Lakhs (Refer Note No. 4 of the standalone financial statements) ||Principal Audit Procedures |
|The Company's evaluation of goodwill for impairment testing involves the comparison of its recoverable amount to its carrying amount as at March 31 2021. The Company has carrying value of goodwill amounting to Rs.2282 Lakhs in its standalone financial statements relating to Consumer Health & Wellness Cash Generating Units ("CGU's"). This is subject to test of impairment by the management in accordance with the applicable accounting standards. ||Procedures performed by us have been enumerated herein below: |
|The recoverable amount is determined based on value in use which represents the present value of the estimated future cash flows expected to arise from the use of the asset company comprising each cash generating unit or group of cash generating units. There is a risk that the goodwill will be impaired if these cash flows do not meet the company's expectations. ||Assessed the appropriateness of the accounting policies in respect of impairment by comparing with the applicable accounting standards. |
|In addition to significance of the amounts involved management's assessment process is complex as it involves significant judgement in determining the assumptions to be used to estimate the forecasted cash flows principally relating to long-term revenue growth rates terminal values margins external market conditions and the discount rate used. Considering the materiality of amounts involved together with the inherent subjectivity related to principal assumptions which are dependent on current and future economic factors and trading conditions varying for different economic and geographical territories assessment of carrying value of goodwill is considered to be complex and determined to be a key audit matter in our current period audit. ||Evaluated the design tested the implementation and operating effectiveness of the internal controls over impairment assessment process including those over the forecast of future revenues operating margins growth rate and terminal values external market conditions and the selection of the appropriate discount rate. Gained an understanding and assessed the reasonableness of business plans by comparing them to prior year's assumptions; |
| ||Tested the reasonableness of the key business projections and valuation assumptions carried out by the management / independent valuer in determining the fair value of the CGU discount rate revenue growth rate EBITDA growth rate terminal growth rate used in computing the fair value of the components. |
| ||Performed retrospective review of projections by comparison with historical performance inquiries with management and forecast trends in the industry. Considered sensitivity to reasonable possibility of changes in the key assumptions and inputs to ascertain whether these possible changes have a material effect on the fair value. |
Information other than the Standalone 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 ManagementDiscussion and Analysis Business Responsibility Report Corporate Governance Report andDirectors' Report but does not include the standalone financial statements and our auditreports 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 our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during 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 cash flows and changes in equity of the Company 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 of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateimplementation and maintenance of accounting policies; making judgments and estimates thatare reasonable and prudent; and design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statement that give a true and fair view and are free from materialmisstatement whether due 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 is also responsible for overseeing the Company's financialreporting process.
Auditor's 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 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: a) Identify and assess therisks of material misstatement of the Standalone financial statements whether due tofraud or error design and perform audit procedures responsive to those risks and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. Therisk of not detecting a material misstatement resulting from fraud is higher than for oneresulting from error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control. b) Obtain an understanding ofinternal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances. Under section 143(3)(i) of the Companies Act 2013 weare also responsible for expressing our opinion on whether the company has adequateinternal financial controls system in place and the operating effectiveness of suchcontrols. c) Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
d) 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. e) Evaluate the overall presentation structure and contentof the Standalone financial statements including the disclosures and whether theStandalone financial statements represent the underlying transactions and events in amanner that achieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant de_ciencies 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
As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
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 so far asit 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 Ind ASspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.
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 toseparate Report in "Annexure B".
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
h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 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 as at March 31 2021 onits financial position in its Standalone financial statements.;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
"Annexure A" to the Independent Auditors' Report
The Annexure referred to in Independent Auditors' Report to the members of the Companyon the standalone financial statements for the year ended March 31 2021.
Based on the audit procedures performed for the purpose of reporting a true and fairview on the Standalone financial statements of the Company and taking into considerationthe information and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit we report that:
1. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of available information.
(b) Some of the fixed assets were physically verified during the year by the managementin accordance with a programme of verification which in our opinion provides for physicalverification of all the fixed assets at reasonable intervals. According to the informationand explanations given to us no material discrepancies were noticed on such verification.In our opinion the frequency of verification of the fixed assets is reasonable havingregard to the size of the Company and the nature of its assets.
(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deed / transfer deed /conveyance deed provided to us we report that the title deeds comprising all theimmovable properties of land and buildings which are freehold are held in the name of theCompany as at the balance sheet date. In respect of immovable properties of land that havebeen taken on lease and disclosed under property plant and equipment in the financialstatements the lease agreements are in the name of the Company where the Company islessee in the agreement.
2. As explained to us the inventories were physically verified during the year by theManagement at reasonable intervals and no material discrepancies were noticed on physicalverification. In our opinion the procedures for the physical verification of inventoryfollowed by management are reasonable and adequate in relation to the size of the companyand the nature of its business.
3. As informed to us the Company has granted an unsecured loan to a subsidiarycompany which is covered in the register maintained under Section 189 of the Act. In ouropinion the terms and conditions of such loan are not prejudicial to the company'sinterest. The repayments in this regard are regular in nature. There is no outstandingbalance of principal and interest which is overdue for more than 90 days hence reportingunder this clause is not applicable.
4. 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 and investments made.
5. 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 as at March31 2021 and therefore the provisions of the clause 3(v) of the Order are not applicableto the Company.
6. The Central Government has prescribed maintenance of cost records under section148(1) of the Act. We have broadly reviewed the accounts and records of the Company inthis connection and are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained. We have not however carried out a detailedexamination of the same.
7. (a) According to the information and explanations given to us and on the basis ofour examination of the books of account the company has been regular in depositingundisputed statutory dues including Provident Fund Employees' State InsuranceIncome-tax Goods and Services tax Custom duty Cess and other material statutory duesduring the year with the appropriate authorities.
(b) There were no undisputed amounts payable in respect of Provident Fund Employees'State Insurance Income Tax Goods and Service Tax Customs Duty cess and other materialstatutory dues in arrears as at March 31 2021 for a period of more than six months fromthe date they became payable.
(c) Details of dues of Income Tax Sales Tax Service Tax Customs Duty Excise Dutyand Value Added Tax which have not been deposited as on March 31 2021 on account ofdisputes are given below:
|Sr. No. Name of Statute ||Nature of Dues ||Amount [Rs.in Lakhs] ||Period to which the amount relates ||Forum where dispute is pending |
| ||Sales Tax ||4 ||2003-04 ||High Court of Andhra Pradesh |
|1 Sales Tax Act and VAT Laws || || ||2004-05 || |
| || || ||2009-10 ||The Appellate Authority upto |
| ||Value Added Tax ||663 ||2010-11 ||Commissioner Level |
| || || ||2011-12 || |
8. In our opinion and according to the information and explanations given to us theCompany has not defaulted in repayment of loans or borrowings from any financialinstitution banks government or due to debenture holders during the year.
9. The Company did not raise any money by way of initial public offer or further publicoffer (including debt instruments) or term loans and hence reporting under clause 3(ix) ofthe Order is not applicable to the Company.
10. To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company or on the Company by its officers or employees hasbeen noticed or reported during the year._ 11. According to the information andexplanations given to us and on the basis of our examination of the records of theCompany the managerial remuneration has been paid or provided in accordance with therequisite approvals mandated by the provisions of section 197 (with schedule V) of theAct.
12. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is notapplicable to the Company.
13. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with
section 177 and 188 of the Act where applicable and details of such transactions havebeen disclosed in the Standalone financial statements as required by the applicableaccounting standards.
14. The Company has made preferential allotment of equity shares during the year underreview. The Company has complied with the provisions contained under section 42 of TheCompanies Act 2013 and the amount raised from preferential allotment has been utilizedfor the purpose for which it was raised.
15. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable to the Company.
16. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
"Annexure B" to the Auditors' Report
Report on the Internal Financial Control clause (i) of sub-section 3 of section 143 ofthe Companies Act 2013 ("the act")
We have audited the internal financial controls over financial reporting of ZydusWellness Limited ("the Company") as of March 31 2021 in conjunction withour audit of the Standalone financial statements of the Company for the year ended on thatdate.
Management Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial control 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 Reportingissued by the Institute of Chartered Accountants of India ["ICAI"]. 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 company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial control 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 materialmisstatement of the Standalone 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 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 financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and
3. provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial 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 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 2021 based on theinternal control over financial reporting criteria 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 MUKESH M. SHAH & CO.
Firm Registration No.: 106625W
Mukesh M. Shah
Membership No.: 030190
Date: May 10 2021