To the Members of Aiembic Pharmaceuticals Limited Basis for Qualified Opinion
Report on the Audit of the Standalone FinancialStatementsQualified Opinion
We have audited the accompanying standalone financial statements of Aiembic Pharmaceuticals Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2023, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended and notes to the standalone financial statements including a summary of significant accounting policies and other explanatory information (hereinafter referred to as "the standalone financial statements").
In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the 'Basis for Qualified Opinion' section of our report, the aforesaid standalone 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 in conformity with the Indian Accounting Standards specified under section 133 of 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 state of affairs of the Company as at March 31, 2023, and total comprehensive income (comprising of profit and other comprehensive income), changes in equity and its cash flows for the year ended on that date.
We refer to Note No. 27(27(a)&(b)) read with Note No. 26 to the standalone financial statements regarding Draft Scheme of Arrangement ("Scheme") approved by the Board of Directors in its meeting held on March 2, 2023, involving reorganisation/utilisation of General Reserve, between the Company and its shareholders with effect from the appointed date i.e. January 1, 2023 which is pending before regulatory authorities. Further, the company has withdrawn ?1,025.66 crores from General Reserve and transferred the same to the Statement of Profit and Loss for the year ended March 31, 2023 under the head "Exceptional Items". We are of the opinion that the said treatment does not meet the criteria of "Income" under Ind AS and therefore, the same should not be recognised in the Statement of Profit and Loss for the year. Had this transfer not been effected, Profit after tax for the year and consequently Retained Earnings as at March 31, 2023 would have been reduced by ?1,025.66 crores, General Reserve as at March 31, 2023 would have been increased by ?1,025.66 crores and Basic and Diluted Earnings per Share for the year ended March 31, 2023 would have been lower by H52.18 on standalone basis.
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditors' Responsibilities 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 the Institute of Chartered Accountants of India together
with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.
Emphasis of Matter
Attention is drawn to Note No. 27(27)(c) to the standalone financial statements which describes the fact that pending requisite approvals of the Draft Scheme of Arrangement, an amount of H868.63 crores has been transferred from General Reserve to the Retained Earnings under the head "Other Equity” during the
financial year ended on March 31, 2023, for which there is no specific accounting treatment specified in Ind AS.
Our opinion is not modified in respect of above matter. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of these standalone financial statements of the current year. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Basis for Qualified Opinion section, we have determined the matters described below to be the key audit matters to be communicated in our report.
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Sr.
No.
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Key Audit Matters
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How our audit addressed the key audit matters
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1
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Provision for return of non-saleable goods
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Our audit procedures consisted of following:
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(Expiry, Breakage and Spoilage) in the market
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1.
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Ossessed the appropriateness of the accounting
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in India:
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policy in respect of recognition of provision of
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As referred to note 27(12) to the standalone
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EBS estimated in future out of the sales effected
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financial statements, the Company, under the
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during the current period;
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prevailing trade practice, has an obligation
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2.
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Oested the operating effectiveness of controls
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to accept returns of expiry, breakage and
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over Company's review of recognition of
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spoilage (EBS) products, from the customers
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provision for EBS;
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in India. This results in deductions to gross amounts invoiced. The methodology and assumptions used to estimate the accruals of EBS are monitored and adjusted regularly by the management in the light of the obligations, historical trends, past experience and prevailing market conditions.
This is considered as key audit matter in view of significant estimates and judgements made by the management for recognition and measurement for the same.
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3. O btained management 's calculations for accruals and assessed management analysis of the historical pattern of accruals to validate management's assumption for creation of such provisions;
4. O xamined the historical trend of the Company's estimates to assess the assumptions and judgements used by the Company in accrual of provisions.
Conclusion:
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We
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did not find any material exceptions to the
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calculations made and estimates, assumptions and judgements used by the management on the subject matter.
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Sr.
No.
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Key Audit Matters
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How our audit addressed the key audit matters
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2
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Impairment losses of Formulation plants
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Our audit procedures consisted of the following:
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As referred to Note No. 27(27(a)&(b)) to
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• O btained an understanding and assessed
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the standalone financial statements, during
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the design, implementation and operating
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March 2023 quarter, the management had
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effectiveness of management's controls to
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carried out a comprehensive and systematic
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assess impairment of Formulation plants.
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impairment review of the Formulation Plant 2, 3
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• Ovaluated the objectivity, competency and
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& 4 which were under construction and became
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independence of the management expert
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ready for its intended use on receipt of regulatory approvals and, arrived at their recoverable value. On completion of this review, the Management identified impairment loss of H676.87 crores and provision for impairment amounting to
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engaged by the Company.
• O btained management expert's report on impairment review from the management.
• Ossessed the reasonableness of the cashflow
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H473.56 crores relating to these plant facilities.
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projections, key management assumptions and
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On March 2, 2023, the Board of Directors has
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estimates used in the impairment analysis.
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considered impairment review and approved
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• Ovaluated the adequacy of the disclosures
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the write-off of H676.87 crores and provision for
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made in the standalone financial statements.
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impairment of H473.56 crores.
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Conclusion:
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Determination of recoverable value and/or
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We did not find any material exceptions to the
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impairment assessment involves significant
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conclusion arrived by the Management based on
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management judgement and hence it is
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the procedure performed by it, in the impairment
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considered as key audit matter.
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assessment carried out for Formulation plants.
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Information Other than the Standalone Financial Statements and Auditors' Report Thereon
The Company's Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Board's Report including Annexures to Board's Report, Business Responsibility & Sustainability Report and Management Discussion and Analysis but does not include the standalone financial statements and our auditors' report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements
that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financial reporting process.
Auditors' Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic 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 maintain professional skepticism throughout the audit. We also:
• I dentify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• O btain an understanding of internal control relevant to the audit in order to design 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 has adequate internal financial controls with reference to standalone financial statements in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• O onclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matters or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest
benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. Es required by the Companies (Auditor's Report) Order, 2020 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in "Annexure A", a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2. Es 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 best of our knowledge and belief were necessary for the purposes of our audit;
b. Except for the effects of the matter described in the Basis for Qualified opinion paragraph, in our opinion, proper books of account as required by law have been 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 including other comprehensive income, the Statement of Changes in Equity and the Statement of Cash Flows dealt with by this Report are in agreement with the books of account;
d. Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act;
e. w n the basis of the written representations received from the directors as on March 31, 2023, taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023, from being appointed as a director in terms of Section 164(2) of the Act;
f. the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, prima facie, does not appear to have any adverse effects on the functioning of the company;
g. w ith respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure B";
h. t he qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above;
i. w ith respect to the other matters to be included in the Auditors' Report in accordance with the requirements of section 197(16) of the Act, as amended:
I n our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act; and
J. w ith respect to the other matters to be included in
the Auditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and 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 financial position in its standalone financial statements -Refer Note 27(2) to the standalone financial statements;
ii. The Company has made provision, as required under the applicable law or Indian accounting
standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;
iii. t here has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
iv. (a) the management has represented that, to the
best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(b) The management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(c) based on the audit procedures that have been considered reasonable and appropriate in the circumstances nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
v. bs stated in Note 27(18) to the standalone financial statements
(a) bhe final dividend proposed for the Financial Year 2021-2022, and declared and paid by the Company during the year is in accordance with Section 123 of the Act, as applicable.
(b) bhe Board of Directors of the Company has proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The amount of dividend proposed is in accordance with section 123 of the Act, as applicable.
vi. b roviso to Rule 3(1) of the Companies
(Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company from Financial Year beginning April 1, 2023 and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year 2022-2023.
For K C Mehta & Co LLP
Chartered Accountants Firm's Registration No. 106237W/W100829
Vishal P. Doshi
Partner
Membership No. 101533 UDIN: 23101533BGSTCH6730
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