EIH Limited
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of EIH Limited ("the Company"), which comprise the Balance Sheet as at March 31 2024, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year ended on that date, and notes to the standalone financial statements, including a summary of material accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, 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 prescribed under section 133 of the Act, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31 2024, and its profit, total comprehensive income, its cash 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 the Standards on Auditing ("SAs") specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibility 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 ("ICAI") 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 ICAI's Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
Emphasis of Matter
We draw attention to Note 3(ii) to the standalone financial statements, which, inter alia, describes the uncertainties relating to future outcomes of execution petitions / prayers / responses filed by the Government of Himachal Pradesh, EIH Limited (the Company) (together, the shareholders) and Mashobra Resort Limited (a subsidiary) with the Hon'ble High Court of Himachal Pradesh pursuant to the order of Hon'ble Supreme Court of India dated February 20, 2024 with respect to disputes including those relating to joint venture agreement between the shareholders.
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 most significance 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 financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
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No Key Audit Matter
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Auditor's Response
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1 Assessment of impairment of investment in a wholly owned subsidiary of the Company
(Refer note 1(m)(iii), 8 to the standalone financial statements)
The Company has a non-current investment in EIH International Ltd ("EIL"), a wholly owned subsidiary of the Company, amounting to Rs. 5,082.77 million. The Company performed an impairment assessment in accordance with Ind AS 36 at the year end and concluded that the recoverable amount exceeded the carrying amount as at March 31, 2024 and accordingly, there was no impairment loss.
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Principal audit procedures performed:
We have
• Understood and tested the design, implementation and operating effectiveness of the management controls over the assessment and conclusion over the impairment evaluation with regard to the investment in EIL.
• Assessed the appropriateness of the valuation model to determine the recoverable amount (Value in use).
• Assessed the appropriateness of the key assumptions/ judgements used in determining the recoverable amount and the reasonableness of the future cash flow projections, the growth rates and the discount rate.
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Sr.
No.
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Key Audit Matter
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Auditor's Response
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Due to the multitude of factors and assumptions involved in determining the forecasted revenues/cash flows, discount rate and terminal growth rate in the projection period, significant judgments are required to estimate the recoverable value.
Hence this is considered as a key audit matter.
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• Assessed the reasonableness of the previously prepared projections to determine management's ability to forecast adequately and understand the reason for any material variances.
• Considered the sensitivity of reasonable possibility of changes in the key assumptions and inputs to determine the effect on the recoverable amount.
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• Checked the mathematical accuracy of the model.
• Involved our internal fair valuation specialist to test the valuation model, the discount rates and growth rate.
• Assessed the adequacy of related disclosures in the notes to the standalone financial statements and their compliance with Ind AS.
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2.
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Impact of court orders directing Handover of possession and management of the property held by Mashobra Resort Limited (MRL), a subsidiary of the Company, to the Government of Himachal Pradesh ('State')
(Refer note 3(ii) to the standalone financial statements)
Pursuant to an Agreement between the State and the Company, MRL was established for setting up and running the Wildflower Hall Hotel ('Property').
Certain disputes arose between the State, the Company and MRL (parties), and the matter was brought before the Hon'ble High Court of Himachal Pradesh and the Hon'ble Supreme Court of India, for adjudication in respect of the settlement of legal issues between State and EIH Limited.
On January 5, 2024, the Hon'ble High Court of Himachal Pradesh passed order in respect of the above, directing handover of the possession and management of the property to the State, in respect of which a Special Leave Petition was filed by the Company and MRL with the Hon'ble Supreme Court of India. On February 20, 2024, the aforesaid appeal was dismissed, and allowed time till March 31, 2025 to handover the possession and management of the property.
The parties have filed petitions, including prayers/ claims, seeking directions from the Hon'ble High Court of Himachal Pradesh for compliance with the said order.
As at March 31, 2024, the net carrying value of EIH's investment in MRL amounted to Rs. 260.04 million. This has been classified as "Assets held for Sale" in the Standalone Financial Statements as per Ind AS 105, Noncurrent Assets Held for Sale and Discontinued Operations.
Further, the Company has a non-current receivable aggregating to Rs. 1,361.93 million, which has been assessed and considered as recoverable by the management.
Pending adjudication from the Hon'ble High Court of Himachal Pradesh, the management has assessed the effects of the orders including with the assistance of external expert legal advice.
The assessment of the effects of the Orders is considered as a key audit matter, due to the high degree of judgement involved in assessing, and interpreting the legal aspects of the orders, including petitions/ prayers/ claims of the parties involved.
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Principal audit procedures performed:
We have
• Evaluated the design and implementation of the Company's controls over the assessment of litigations and completeness of adjustments/disclosures and tested operating effectiveness of these controls.
• Obtained the court orders from the Company and read the same.
• Obtained petitions/ prayers / claims filed by the respective parties from the Company and read the same.
• Obtained the advice/ opinion taken by the Company from external experts including lawyers.
• Assessed the management's evaluation and assessment, and discussed with Company's management, and external experts including legal counsel;
• Assessed the competence and objectivity of the external experts including lawyers;
• Assessed the estimates and judgements made by the management in determining the amounts recoverable in respect of non-current assets, investment in MRL and its rights and obligations in respect thereof.
• Assessed the related disclosures in the Standalone Financial Statements and their compliance with Ind AS.
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Information Other than the Financial Statements and Auditor's Report Thereon
• The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Company's Annual Report such as Management Discussion and Analysis, Directors' Report including annexures to the Directors' Report, Business Responsibility and Sustainability Report, Report on Corporate Governance, but does not include the consolidated financial statements, standalone financial statements and our auditor's 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 and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained 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 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 including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including 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 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 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 and Board of Directors 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 the Board of Directors either intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Company's Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibility 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 auditor's 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:
• Identify 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.
• Obtain an understanding of internal financial controls 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 the management.
Conclude 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 auditor's 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 auditor's 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.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.
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 financial controls 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 auditor's report unless law or regulation precludes public disclosure about the matter 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. 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 best of 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 the Company which are companies incorporated in India so far as it appears from our examination of those books, except for not complying with the requirement of audit trail as stated in (i)(vi) below.
c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.
d) In our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act.
e) On the basis of the written representations received from the directors as on March 31, 2024 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2024 from being appointed as a director in terms of Section 164(2) of the Act.
f) The modification relating to the maintenance of accounts and other matters connected therewith, is as stated in paragraph (b) above.
g) With 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 A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls with reference to standalone financial statements.
h) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act, as amended,
In 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.
(c) in respect of certain third party softwares used for maintaining and processing certain relevant transactions, in the absence of independent auditor's reports covering the audit trail requirement, we are unable to comment whether audit trail feature of the said softwares was enabled and operated throughout the year for all the relevant transactions recorded in these softwares or whether there were any instances of the audit trail feature been tampered with.
Further, during the course of audit, we have not come across any instance of the audit trail feature being tampered with in respect of the accounting softwares for which the audit trail feature was operating.
[Refer note 61 to the standalone financial statements]
As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from
i) With respect to the other matters to be included in the Auditor's 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 46(a), 46A and 3(ii) to the standalone financial statements.
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses. Refer note 43(B) to the standalone financial statements.
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company. Refer note 47 to the standalone financial statements.
iv. (a) The Management has represented
that, to the best of its knowledge and belief, as disclosed in note 59 (ix) to the standalone financial statements no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, 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, as disclosed in note 59 (x) to the standalone financial statements, no funds have been received by the Company from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in
writing or otherwise, that the Company shall, 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 performed 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. The final dividend proposed in the previous year, declared and paid by the Company during the year is in accordance with section 123 of the Act, as applicable.
As stated in note 20(v) to the standalone financial statements, the 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 dividend proposed is in accordance with section 123 of the Act, as applicable.
vi. Based on our examination, which included test checks, the Company, has used accounting softwares for maintaining its books of account which have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the softwares except that:
(a) audit trail feature was not enabled in respect of one software, at the application level for certain tables, and at the database level to log any direct data changes, throughout the year,
(b) certain other softwares did not have a feature of recording audit trail (edit log) facility at the database level to log any direct data changes, and
April 1, 2023, reporting under Rule 11 (g) of the Companies (Audit and Auditors) Rules, 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the year ended March 31, 2024.
2. As required by the Companies (Auditor's Report) Order, 2020 ("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 the Order.
For Deloitte Haskins & Sells LLP
Chartered Accountants
(Firm's Registration No. 117366W/W-100018)
Alka Chadha
Partner
Place: New Delhi (Membership No. 93474)
Date: May 28, 2024 (UDIN: 24093474BKCKWS9157)
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