cera sanitaryware ltd share price Auditors report


To,

The Members of Cera Sanitaryware Limited

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalone financial statements of CERA SANITARYWARE LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2022, 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 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, 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 the 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 (financial position) of the Company as at 31st March, 2022, the profit (financial performance including other comprehensive income), changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with 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 ("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 ICAIs Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our opinion on standalone financial statements.

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 as the key audit matters to be communicated in our report.

Sr. No. Allowance for Expected Credit Losses (ECL) in respect of Trade Receivables and Capital Advances
1. The Company has made provision for Expected Credit Losses in respect of trade receivables aggregating to Rs 1,279.88 lakhs and that of capital advances aggregating to Rs 328.24 lakhs up to 31st March, 2022 as against the gross doubtful / litigated amounts in respect of trade receivables of Rs 2,282.23 lakhs and capital advances of Rs 468.91 lakhs. These are based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Company considered current and anticipated future economic conditions relating to entities the Company deals with. In calculating expected credit loss, the Company has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID-19. The Company has also determined allowance for ECL based on the information available with the Legal department of the Company. We identified allowance for credit losses as a key audit matter because the Company exercises significant judgement in calculating the expected credit losses.
Refer Notes No.8,11, 36 and 40 to the standalone financial statements.
How our audit addressed the Key Audit Matter
Our Audit procedures related to the allowance for expected credit losses for trade receivables and capital advances included the following, among others:
We tested the effectiveness of controls over the:
development of the methodology and model for the allowance for credit losses, including consideration of the current and estimated future economic conditions;
completeness and accuracy of information used in the estimation of probability of default; and computation of the allowance for credit losses.
For a few customers, we tested the input data such as credit reports, past history of dealings with them and other credit related information used in estimating the probability of default by comparing them to external and internal source of information.
We carried out detailed analysis of balances of trade receivables and capital advances, (i) where no legal actions have been taken so far by the Company and the reasons therefor, (ii) where legal actions have been taken and the allowance for ECL has been partially/ fully made and considered the reasons therefor and (iii) where legal actions have been taken but no allowance for ECL has been made and the reasons therefor.
Assessed the adequacy of allowance for ECL recorded and evaluated disclosures in the standalone financial statements in relation to these items.
Verified Balance Confirmations directly received by us from few selected trade receivables and also examined reconciliations/ discrepancies, if any.
We also reviewed the internal auditors report for the history and current scenario of a few customers.
We carried out analysis of those trade receivables where there is significant increase in credit risk and also reviewed the ageing of the trade receivables pertaining to current and immediately preceding years.
2. Assessment of Carrying Value of Investments in Subsidiaries and an Associate
The Company has made investments in subsidiaries aggregating to Rs 3,338.33 lakhs and has also made capital contributions aggregating to Rs 806 lakhs in one associate, and are outstanding as at 31st March, 2022 which are subject to impairment assessment. On an annual basis, the management evaluates the existence of impairment indicators, such as accumulated losses, to the carrying values of these investments in its subsidiaries / associate.
The Company has entered into various agreements (MOU, SPA and Share Escrow Agreement) with Anjani Vishnu Holding Ltd. (Joint Venture Partner and acquirer company) and Anjani Tiles Ltd. (subsidiary company) for the transfer / divestment of entire stake of the Company in equity and preference shares of ATL for a total consideration of Rs 2,869.20 lakhs to be completed by 31st March, 2023. These arrangements will result into impairment loss of Rs 573.80 lakhs. A separate detailed Note No.16 explains the entire arrangement including valuation and impairment loss of investments in this subsidiary company.
The processes and methodologies for assessing and determining the recoverable amount of these investments, (other than investment in above referred subsidiary company) involve estimates, assumptions and significant management judgment, in particular with reference to forecasts of future cash flows relating to the terminal value, as well as long-term growth rates, discount rates, etc.
The testing for impairment in these investments (other than investment in the subsidiary company) has been identified as a key audit matter in view of the significance of the amounts involved and as the determination of recoverable value for impairment assessment involves significant management judgment.
Refer Notes No. 3.17(f), 6, 16, 29 and 39 to the standalone financial statements.
How our audit addressed the Key Audit Matter
Our audit procedures for assessment of investments included the following :
Obtained an understanding from the management, assessed and tested the design and operating effectiveness of the Companys controls over impairment assessment of its investments in subsidiaries / associates.
Evaluated the Companys process regarding impairment assessment in assessing the appropriateness of the impairment model including an independent assessment of the underlying assumptions relating to discount rate, terminal value etc.
Assessed the carrying value of the investment in subsidiaries / associate, (other than investment in the subsidiary company) to determine whether the valuations made by the Company were within an acceptable range and reasonable.
Checked the mathematical accuracy of the computations and agreed relevant data back to actual past results and other supporting documents.
Assessed the Companys sensitivity analysis and evaluated whether any reasonably foreseeable change in assumptions could lead to impairment.
Discussed with their auditors (wherever applicable) to develop an understanding of the operating performance and outlook used in their own valuation model and to assess consistency with the assumptions used in the model.
Evaluated the adequacy of the disclosures made in the standalone financial statements.
Based on the above procedures performed, we did not identify any exceptions in the managements assessment in relation to the carrying value of investments in subsidiaries / associate (other than investment in the subsidiary Company).

Information Other than Financial Statements and Auditors Report Thereon

The Companys management and the Board of Directors are responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexures to Boards Report, Business Responsibility Report, Corporate Governance Report, and Shareholders Information, 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 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.

Managements and Board of Directors Responsibilities for the Standalone Financial Statements

The Companys Management and the Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance (including other 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 specified under section 133 of the Act read with relevant Rules issued thereunder. 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, the Management and the Board of Directors are responsible for assessing the Companys 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 are also responsible for overseeing the Companys 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:

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 control relevant to the audit in order to design audit procedures that are appropriate inthe circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system 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 and the Board of Directors.

Conclude on the appropriateness of managements and Board of Directors 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 Companys 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.

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 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 are required to 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 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.

Other Matter

We draw attention to Notes No. 16.1 to 16.5 to the standalone audited financial results which describe the transfer / divestment of entire stake of the Company in Anjani Tiles Limited, a subsidiary of the Company, consisting of Equity and Preference shares as under: 16.1 Pursuant to the Resolution passed at the Board Meeting held on 5th August, 2021 for consideration of the proposal and in principle approval for divestment of the Companys entire stake in Anjani Tiles Limited, a subsidiary company, a Memorandum of Understanding (MOU) was executed on 17th August, 2021 by and amongst Cera Sanitaryware Limited (Cera), Anjani Vishnu Holdings Ltd (AVHL) (Joint Venture Partner and Acquirer Company) and Anjani Tiles Limited (ATL) (Subsidiary Company) for the transfer / divestment of entire stake in Anjani Tiles Limited, consisting of 1,02,00,000 Equity shares of Rs 10/- each and 2,42,30,000 1% Cumulative Redeemable Preference shares of Rs 10/- each on a fully diluted basis, for a total consideration of Rs 2,869.20 Lakhs.

16.2 The Company, AVHL and ATL also entered in to Share Purchase Agreement (SPA) dated 26th August, 2021 pursuant to which the Company agreed to sell all the Equity and Preference Shares held by it in ATL to AVHL.

16.3 Total consideration as referred above, will be received by the Company in one or more tranches, beginning from 30th September, 2021 and completing on 31st March, 2023 through an escrow mechanism and as per the Payment Schedule set out in the MOU. Accordingly, the first tranche of Rs 643.00 Lakhs has been received on 28th September, 2021 from the Acquirer Company and 64,30,000 Preference Shares of ATL have been transferred (off market) to AVHL on 29th September, 2021.

16.4 Further, pursuant to the MOU and SPA, the Share Escrow Agreement was executed by the Company, AVHL and ATL with Federal Bank Ltd. (Escrow Agent) jointly on 23rd November, 2021. Both Cera and AVHL have transferred their respective entire Equity shareholding and their respective balance Preference shareholding to the Escrow Account in January, 2022 with lien marked in favour of the Escrow Agent.

16.5 Companys shareholdings in Equity and Preference shares in ATL have been presented as Non-current Assets classified as Held for Sale as on 31st March, 2022 as per Indian Accounting Standard - 105 - "Non-current Assets Held for Sale and Discontinued Operations", measured at the lower of its carrying amount and fair value less costs to sell in respect of Equity shares and at fair value in respect of Preference shares as at 31st March, 2022. The impairment loss of Rs 573.80 Lakhs on Equity Shares (Preference shares to be transferred at fair value which is equivalent to carrying amount) due to above arrangements has been recognised in the Statement of Profit and Loss as Exceptional Item.

Our report is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditors Report) Order, 2020 ("the Order"), issued by the Central Government of India in terms of subsection (11) of section 143 of the Companies Act, 2013, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

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 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(the standalone financial statements) 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 Indian Accounting Standards specified under Section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015 as amended.

(e) On the basis of the written representations received from the directors as on 31st March, 2022 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2022 from being appointed as a director in terms of Section 164 (2) of the Act. (f) 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 B". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Companys internal financial controls with reference to standalone financial statements. (g) With respect to the matter to be included in the Auditors Report in accordance with the requirements of section 197(16) of the Act, as amended: In our opinion and according to the information and explanations given to us, the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) of the Act which are required to be commented upon by us.

(h) With 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 as at 31st March, 2022 on its financial position in its standalone financial statements – Refer Note No. 45 to the standalone financial statements. ii. According to the information and explanations provided to us, the Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses. iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company. iv. (a) The Companys Management and the Board of Directors have represented that, to the best of their knowledge and belief, 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 person or entity, including foreign entity ("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 Companys Management and the Board of Directors have represented, that, to the best of their knowledge and belief, no funds 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; and (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. (a) The dividend declared or paid during the year by the Company is in compliance with section 123 of the Companies Act, 2013.

(b) The Board of Directors of the Company have proposed final dividend and special 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.

FOR N. M. NAGRI & CO.
Chartered Accountants
Firm Regn. No.106792W
N. M. NAGRI
PROPRIETOR
Place : Ahmedabad Membership No. 016992
Date : 10th May, 2022 UDIN: 22016992AIRRMO6700

ANNEXURE-A TO THE INDEPENDENT AUDITORS REPORT

(Referred to in ‘Report on Other Legal and Regulatory Requirements section of our report to the Members of CERA SANITARYWARE LIMITED of even date for the year ended 31st March, 2022) Based on the audit procedures performed by us for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations provided to us by the Company and the books of account and other records examined by us in the normal course of audit and to the best of our knowledge and belief, we state that: (1) In respect of the Companys Property, Plant and Equipment and Intangible Assets: (a) (A) The Company has maintained proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment.

(B) The Company has maintained proper records showing full particulars of intangible assets.

(b) The Company has a regular program of physical verification of its property, plant and equipment by which the property, plant and equipment are verified in a phased manner. In our opinion, the periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification during the year. (c) The title deeds of all immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee) disclosed in the financial statements under the head "Property Plant and Equipment", are held in the name of the Company.

(d) The Company has not revalued any of its Property, Plant and Equipment (including right-of-use assets) and intangible assets during the year.

(e) No proceedings have been initiated during the year or are pending against the Company as at 31st March, 2022 for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (as amended in 2016) and rules made thereunder.

(2) (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable. The Company has maintained proper records of inventory. In our opinion, the coverage and procedure of such verification by the management is appropriate. The discrepancies noticed on verification between the physical stock and the book records were less than 10% in the aggregate for each class of inventory as stated in the financial statements. Such discrepancies have been properly dealt with in the books of account.

(b) During the year the Company has been sanctioned working capital limits in excess of rupees five crore, in aggregate, from State Bank of India on the basis of security of current assets. The quarterly returns / statements filed by the Company with Sate Bank of India are in agreement with the books of account of the Company.

(3) (a) During the year, the Company has not provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or any other parties and hence reporting under clauses 3(iii)(a), (c), (d), (e) and (f) of the Order are not applicable for the year under report.

(b) In our opinion, the investments made during the year are, prima facie, not prejudicial to the Companys interest.

(4) In our opinion, the Company has complied with the provisions of Sections 185 and 186 of the Companies Act, 2013 with respect to the investments made. The Company has not given any loans, provided any guarantee or security during the year.

(5) The Company has not accepted any deposits from the public within the meaning of the directives issued by the Reserve Bank of India, provisions of Sections 73 to 76 of the Act, or any other relevant provisions of the Act and the rules framed thereunder. Hence reporting under clause 3(v) of the Order is not applicable.

(6) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended, prescribed by the Central Government under section 148(1) of the Companies Act, 2013 and are of the opinion that prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate and complete.

(7) (a) The Company has generally been regular in depositing undisputed statutory dues including Goods and Service Tax, provident fund, employees state insurance, income-tax, salestax, value added tax, duty of customs, duty of excise, service tax, cess and any other statutory dues, as applicable, to the appropriate authorities. Further, no undisputed amounts payable in respect thereof were outstanding at the year end for a period of more than six months from the date they became payable.

(b) The Statutory dues of income-tax, sales-tax, service-tax, duty of customs, duty of excise, value added tax and GST (as applicable) which have not been deposited as at 31st March, 2022 on account of any dispute, are given below:

Sr. Name of Statute No. Nature of Dues Amount (Rs in Lakhs) Period to which the amount relates (F.Y.) Forum where dispute is Pending
1 Income Tax Act, 1961 Income Tax 29.38 2017-18 CIT-Appeals
2 Income Tax Act, 1961 Income Tax 690.65 2016-17 CIT-Appeals
3 Income Tax Act, 1961 Income Tax 680.38 2015-16 CIT-Appeals
4 Central Excise Act, 1944 Central Excise 2.77 1991-92 Supreme Court
5 Central GST and Central Service Tax 75.31 2014-15, 2015-16 Tribunal Appeal in the process of
Excise Act,1944 and 2016-17 being filed
6 Punjab Value Added Tax Central Sales Tax 10.24 2010-11 The Deputy Excise and Taxation
Act 2005, (VAT) Chandigarh and Value Added Tax Commissioner (Appeal) Chandigarh
7 Central Sales tax Central Sales tax 23.05 2016-17 Department of Trade and Taxes,
Act 1956, Delhi Delhi (Appeal)

(8) There were no transactions relating to previously unrecorded income that have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (43 of 1961).

(9) (a) The Company has not defaulted in repayment of loans or other borrowings or in the payment of interest thereon to any lender.

(b) The Company has not been declared wilful defaulter by any bank or financial institution or other lender.

(c) The Company has not taken any term loans during the year and there are no outstanding term loans at the beginning of the year and hence, reporting under clause 3(ix)(c) of the Order is not applicable for the year under report.

(d) On an overall examination of the financial statements of the Company, funds raised on short-term basis have, prima facie, not been used during the year for long-term purposes by the Company.

(e) The Company has not taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries, associate or joint ventures and hence, reporting under clause 3(ix)(e) of the Order is not applicable for the year under report. (f) The Company has not raised any loans during the year on the pledge of securities held in its subsidiaries, associate or joint ventures and hence, reporting on clause 3(ix)(f) of the Order is not applicable for the year under report.

(10) (a) The Company has not raised any money by way of initial public offer or further public offer (including debt instruments) during the year. Hence, reporting under clause 3(x)(a) of the Order is not applicable to the Company for the year under report.

(b) During the year, the Company has not made any preferential allotment or private placement of shares or convertible debentures (fully, partially or optionally convertible) and hence, reporting under clause 3(x)(b) of the Order is not applicable for the year under report.

(11) (a) No fraud by the Company or any fraud on the Company has been noticed or reported during the year.

(b) No report under sub-section (12) of section 143 of the Companies Act has been filed by the auditors in Form ADT-4 as prescribed under rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government, during the year and upto the date of this report.

(c) No whistle blower complaints were received by the Company during the year.

(12) The Company is not a Nidhi Company. Accordingly, provisions of paragraph 3(xii) (a), (b) and (c) of the Order are not applicable. (13) In our opinion and according to the information and explanations given to us, the Company is in compliance with Sections 177 and 188 of Companies Act, 2013 where applicable, in respect of all transactions with the related parties and the details of related party transactions have been disclosed in the standalone financial statements as required by the applicable Indian Accounting Standards. (14) (a) In our opinion the Company has an adequate internal audit system commensurate with the size and the nature of its business.

(b) We have considered, the internal audit reports for the year under audit, issued to the Company, in determining the nature, timing and extent of our audit procedures.

(15) In our opinion, the Company has not entered into any non-cash transactions with directors or persons connected with them, covered under section 192 of the Companies Act, 2013. Accordingly, paragraph 3(xv) of the Order is not applicable to the Company for the year under report.

(16) (a) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, paragraph 3(xvi)(a), (b) and (c) of the Order is not applicable to the Company.

(b) In our opinion, there is no core investment company within the Group (as defined in the Core Investment Companies (Reserve Bank) Directions, 2016) and accordingly reporting under clause 3(xvi)(d) of the Order is not applicable.

(17) The Company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(18) There has been no resignation of the statutory auditors of the Company during the year.

(19) On the basis of the financial ratios, ageing and expected dates of realisation of financial assets and payment of financial liabilities, other information accompanying the financial statements and our knowledge of the Board of Directors and Management plans and based on our examination of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on the date of the audit report indicating that Company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date. We, however, state that this is not an assurance as to the future viability of the Company. We further state that our reporting is based on the facts up to the date of the audit report and we neither give any guarantee nor any assurance that all liabilities falling due within a period of one year from the balance sheet date, will get discharged by the Company as and when they fall due.

(20) (a) There are no unspent amounts towards Corporate Social Responsibility (CSR) on other than ongoing projects requiring a transfer to a Fund specified in Schedule VII to the Companies Act in compliance with second proviso to sub-section (5) of Section 135 of the said Act. Accordingly, reporting under clause 3(xx)(a) of the Order is not applicable for the year.

(b) In our opinion, there are no ongoing projects towards Corporate Social Responsibility (CSR) requiring a transfer to special account in compliance with the provision of sub-section (6) of section 135 of the said Act. Accordingly, reporting under clause 3(xx)(b) of the Order is not applicable for the year.

(21) Our reporting on the matters specified in paragraphs 3(xxi) and 4 read with the proviso to paragraph (2) of the Companies (Auditors Report) Order, 2020, has been made in paragraph (2) of Other Legal and Regulatory Requirements section of our Auditors Report on the consolidated audited financial statements.

FOR N. M. NAGRI & CO.
Chartered Accountants
Firm Regn. No.106792W
N. M. NAGRI
PROPRIETOR
Place : Ahmedabad Membership No. 016992
Date : 10th May, 2022 UDIN: 22016992AIRRMO6700

ANNEXURE-B TO THE INDEPENDENT AUDITORS REPORT

(Referred to in paragraph (f) under "Report on Other Legal and Regulatory Requirements" section of our report to the Members of CERA SANITARYWARE LIMITED of even date for the year ended 31st March, 2022)

Independent Auditors Report on the Internal Financial Controls with reference to the standalone financial statements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act") Opinion

In conjunction with our audit of the standalone financial statements of CERA SANITARYWARE LIMITED (‘the Company), as of and for the year ended 31st March 2022, we have audited the internal financial controls with reference to the standalone financial statements of the Company as of that date.

In our opinion, the Company has, in all material respects, adequate internal financial controls with reference to the standalone financial statements and such internal financial controls were operating effectively as at 31st March, 2022, based on the internal financial controls with reference to the standalone financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India.

Managements Responsibility for Internal Financial Controls

The Companys management and the Board of Directors are responsible for establishing and maintaining internal financial controls based on the internal financial controls with reference to the standalone financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India ("ICAI"). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls with reference to the standalone financial statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls with reference to the standalone financial statements. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls with reference to the standalone financial statements were established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls with reference to the standalone financial statements and their operating effectiveness. Our audit of internal financial controls with reference to the standalone financial statements included obtaining an understanding of such internal financial controls, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys internal financial controls system with reference to the standalone financial statements.

Meaning of Internal Financial Controls with Reference to the Standalone Financial Statements

A Companys internal financial controls with reference to the standalone financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone financial statements for external purposes in accordance with generally accepted accounting principles. A Companys internal financial controls with reference to the standalone financial statements includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of standalone financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the standalone financial statements.

Inherent Limitations of Internal Financial Controls with Reference to the Standalone Financial Statements

Because of the inherent limitations of internal financial controls with reference to the standalone financial statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls with reference to the standalone financial statements to future periods are subject to the risk that the internal financial controls with reference to the standalone financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

FOR N. M. NAGRI & CO.
Chartered Accountants
Firm Regn. No.106792W
N. M. NAGRI
PROPRIETOR
Place : Ahmedabad Membership No. 016992
Date : 10th May, 2022 UDIN: 22016992AIRRMO6700