coffee day enterprises ltd Directors report

Note: Pending Resolution of one-time settlement with lenders the Company and its subsidiaries have not recognised interest on borrowings to the extent of Rs 168/ Crores ( previous year Rs 185 /Crores).

Performance Overview

During the fiscal year ended 31st March 2023, Net revenues increased by 59% to Rs.924 Crores in FY 2022-23, compared with Rs.582 Crores reported in FY 2021-22.

The Consolidated net Loss for the year under review attributable to shareholders of the company stood at Rs.380 Crores compared with Loss of Rs.121 Crores in the previous financial year. The loss during FY 22-23 is mainly due to write-off of balances due from Sical Logistics Limited to the Company and its subsidiaries of Rs.392 crores as per the order dated 8th December 2022 of NCLT, Chennai.

State of The Companys Affairs

The state of the Company affairs forms an integral part of Management Discussion & Analysis Report.

Dividend

The Board of Directors of the Company has not recommended any dividend for the financial year 2022-23.

Transfer to Reserves:

In accordance to the provisions of Section 134(3)(j) of the Companies Act, 2013, (hereinafter “the Act”) the Company has not proposed any amount to transfer to the General reserves of the Company for the financial year 2022-23.

Deposits:

The Company has not accepted any Deposits under Section 73 and Chapter V of the Act and the rules made thereunder.

Particulars of Loans, Guarantees or Investments:

The details of the loans, guarantees and investments are provided in the notes to the audited financial statements annexed with the Annual report.

Subsidiaries, Joint Ventures and Associate Companies:

As on 31st March, 2023, the Company has 17 subsidiaries (including step-down subsidiaries), 4 Associate Companies and 3 Joint Ventures. The details of the Companies which are yet to commence operations and which have been liquidated or sold during the year are mentioned in “Form AOC-1”, which is attached as an “Annexure VII.” A statement containing the salient features of the financial statements of Subsidiaries, Associate Companies or Joint Ventures are mentioned specifically in the same annexure as mentioned above. In accordance with Section 136(1) of the Act, the financial statements of the subsidiaries companies are available on the Companys official website post approval of the members.

In line with Regulation 24 and Regulation 46(2)(h) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (hereinafter “the Listing Regulations”) the Company has formulated a detailed policy for determining ‘material subsidiaries and the said policy is available at the Companys official website and may be accessed at the link : https://coffeeday.com/Stakeholders/Policies/Material Subsidiary.pdf

Management Discussion & Analysis Report:

As stated in Regulation 34(2)(e) of the Listing Regulations, the Annual Report shall contain a detailed report on Management Discussion & Analysis, which is hereto attached with the Annual report in “Annexure-I.”

Corporate Governance:

The report on Corporate Governance along with a Certificate from the Practicing Company Secretary regarding proper compliance of Corporate Governance pursuant to the requirements of Schedule V of the Listing Regulations forms an integral part of the Annual Report stated in “Annexure-II.”

Dividend Distribution Policy:

In accordance with Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2016, the Board of the Company has adopted Dividend Distribution policy in their meeting held on 18th May, 2017, which aims at marking the right balance between the quantum of dividend paid to its shareholders and the amount of profit retained for its commercial requirements. The said policy is available in the website of the company.”

Board Diversity:

The Company recognizes and embraces the importance of diverse Board in its success. We believe that a truly diverse board will leverage differences in thought, perspective, knowledge, industry experience that will help us retain our competitive strength. The Company has evaluated the policy with a purpose to ensure adequate diversity in Board of Directors, which enables them to function efficiently and foster differentiated thought processes at the back of varied industrial and management expertise. The Board recognises the importance of a diverse composition and has therefore adopted a Board Diversity Policy. The policy is made available at the Companys official website via link:https://www.coffeeday.com/PDF/BOARD%20DIVERSITY%20POLICY.pdf the directors have laid down the internal controls based on the internal controls framework established by the Company, which in all material respects were operating effectively as at March 31, 2023.

• The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate. The Company has substantially complied with material provisions of such acts and regulations as are relevant for its operations.

Declaration by Independent Directors:

All the Independent Directors have given their declarations stating that they meet the criteria of independence as laid down under Section 149(6) of the Act read with Regulation 16(1)(b) of the Listing Regulations. In the opinion of the Board, they fulfil the conditions of independence as specified in the Act and the Listing Regulations and are independent of the management.

Committees of the Board:

The Company has four main Committees of the Board i.e.:

(a.) Audit Committee,

(b.) Nomination and Remuneration Committee and,

(c.) Stakeholders Relationship Committee.

(d.) Corporate Social Responsibility.

The detailed information on each of these committees including its composition, functioning and number of meetings are disclosed in the Corporate Governance report annexed with the Annual report of the Company.

Meetings of the Board:

During the financial year 2022-23, the meetings of the Board of Directors were held six (6) times. Details of these meetings and other Committee/General meetings are given in the report on Corporate Governance Report attached with the Annual report.

Particulars of Contracts/arrangements with related parties:

All the repetitive Related Party Transactions that were entered into during the FY 2022-23 were on an arms length basis and in the ordinary course of business. There were no materially significant Related Party Transactions made by the Company during the year that required shareholders approval under Regulation 23 of the Listing Regulations. Prior omnibus approval from the Audit Committee is obtained for transactions which are repetitive in nature. Further, disclosures are made to the Committee on a quarterly basis.

Further, Particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the Form AOC-2 have been enclosed as Annexure-VIII pursuant to clause (h) of subsection (3) of Section 134 of Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules 2014.

The Company has adopted a Policy for dealing with Related Party Transactions and is made available on the Companys official website via web link: https://www.cotfeeday.com/PDF/RPT%20PQLICY.pdf

Material changes and commitment - if any, affecting the financial position of the Company from the end of the financial year till the date of this Report:

There has been no material change and commitment, affecting the financial performance of the Company which has occurred from the end of the financial year of the Company to which the financial statements relate to till the date of this report.

Change in nature of business:

There has been no change in the nature of business of the Company.

Conservation of Energy, Research and Development, Technology absorption, Foreign Exchange Earnings & Outgo:

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3) (m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 is provided in “Annexure-III” to this Annual report.

AUDITORS:

a) Statutory Auditors:

Members of the Company have appointed M/s. Venkatesh & Co., Chartered Accountants, as Statutory Auditors of the company for the period of 5 years from the Conclusion of 12^th Annual General Meeting till the conclusion of 17^th Annual General Meeting which will fall in the year 2025 in their 12^th Annual General Meeting held on 31^st December 2020.

b) Secretarial Auditor:

In accordance with Section 204 of the Act and the rules made there under, the Company has appointed M/s G. Akshay & Associates, Practising Company Secretaries, Bangalore to undertake the Secretarial Audit of the Company for the financial year ended 31st March, 2023. The Secretarial Audit report issued in this regard is attached as “Annexure-IV” (including Secretarial Audit Reports of Coffee Day Global Limited, Coffee Day Trading Limited and Tanglin Developments Limited).

c) Cost Auditor:

In terms of the provisions of Section 148 of the Act, the appointment of the Cost Auditors does not apply to the Company.

d) Internal Auditor:

Pursuant to the provisions of Section 138 of the Act read with the Companies (Accounts) Rules, 2014, the Company has appointed M/s A B S & Co., Chartered Accountants as Internal Auditors of the Company.

Significant and material orders passed by the Courts/Regulators:

During the year under report there were no significant and material orders passed/notices served by Courts/Regulators except the following

Extract of Annual Return:

An extract of the Annual return in form MGT-9 in compliance with Section 92 of the Companies Act, 2013 read with applicable rules made thereunder is annexed as “Annexure-V” and is placed on the website www.coffeeday.com

Business Responsibility & Sustainability Report:

The Regulation 34(2)(f) of the Listing Regulations, which pertains to report on Business Responsibility & Sustainability is not applicable to current reporting period, as the Company is not under top one thousand companies based on market capitalization as on 31^st March 2023.(Under BSE and NSE, the Company stands on 1093 and 1158 ranks respectively)

Secretarial Standards:

The Company complies with all Secretarial Standards issued by Institute of Company Secretaries of India. Internal Financial Control (IFC) and its Adequacy:

The Internal Controls of the Company operate through well documented standard policies and guidelines. The Company has adequate internal financial control procedures commensurate with its size and nature of business, which helps in ensuring orderly and efficient conduct of its business. This system provide a reasonable assurance of financial and operational information, complying with applicable statutes, safeguarding of assets of the Company, prevention and detection of frauds, accuracy and completeness of accounting records and ensuring compliance with corporate policies.

Exceptions if any are reported under “Explanatory Notes of Management” for each financial quarter.

All the significant internal audit observations and management actions thereon are reported to Audit Committee on a quarterly basis. The Audit Committee reviews the operations and assesses the adequacy of the actions proposed as well as monitors their implementation. The internal auditors conduct a quarterly follow-up for implementation of all audit recommendations and the status report is presented to the Audit Committee regularly.

The Companys management has assessed the effectiveness of the internal control over financial reporting for the year ended 31st March, 2023 and based on the assessment; believe that the system is working effectively. The Statutory Auditors have issued a report on the adequacy and effectiveness of the internal control systems over financial reporting.

Whistle Blower Policy/Vigil Mechanism:

As per the requirements laid down under Section 177(9) of the Act and Regulation 22 of the Listing Regulations, the Company has established the Whistle blower Policy which encourages Directors and employees to bring to the Companys attention, instances of unethical behaviour, actual or suspected incidents of fraud or violation of the Companys Code of Conduct that could adversely impact on Companys operations and business. The Policy provides that the Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. The practice of the Whistle blower Policy is overseen by the Audit Committee and no employee has been denied access to the Committee.

The Contact details of Chairman of Audit committee as under:

Name: Mr. K. R. Mohan

43 New No.22, 1st Floor 16th Cross,

8 th Main, Malleswaram Bangalore Karnataka 560055 Cell No.: 9844152676 Email id:kr_mohan@hotmail.com

The Whistle Blower Policy is available on the Companys official website and may be accessed through web link: https://coffeeday.com/PDF/WhistleBlower.pdf

Particulars of Employees:

As stated in provisions of Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended from time to time, a statement showing the names and other particulars of the employees drawing remuneration in excess of the

limits set out in the said rules which includes the name of top 10 employees in terms of remuneration, forms part of this annual report. Pursuant to the provisions of Section 136(1) of the Act, the Board report is being sent to the shareholders including the said statement.

Disclosure pertaining to the remuneration as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in “Annexure-VI”.

Corporate Social Responsibility (CSR):

Pursuant to the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, and on the recommendations of the CSR Committee comprising of Mr. S.V. Ranganath as the Chairman and Mrs. Malavika Hegde and Mr. K.R. Mohan as Members, the CSR policy is adopted and approved by the Board of the Company. The said policy has been hosted on the Companys website and is available on the link: https://coffeeday.com/Stakeholders/Policies/CSR-Policy-CDEL.pdf it lays down the purpose of formulation of the policy, areas of focus, composition of Committee and CSR budget.

During the year under Report, the Company is not required to spend any amount on CSR activities.

Green Initiatives:

In commitment to keep in line with the Green Initiative and going beyond to it, electronic copy of the Notice of 15th Annual General Meeting along with Annual Report of the Company are sent to all Members whose email addresses are registered with the Company/Depository Participant(s).

Prohibition and Redressal of Sexual Harassment at Work place:

The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules made thereunder. The Policy aims to promote a healthy work environment and to provide protection to employees at workplace and redress complaints of sexual harassment and related matters thereto. The Company has also constituted an Internal Complaints Committee, known as the Prevention of Sexual Harassment (POSH) Committee, to enquire into complaints of sexual harassment and recommend appropriate action.

Following are the Internal Complaints Committee members.

1. Ms. Bhavna Halappa - Presiding Officer

2. Ms. Arundhati Mukoo - Internal member

3. Mrs. G. Vanajakshi N - External Member

During the financial year 2022-23, the Company has not received any complaints on sexual harassment.

I. Following are the Disclaimers/Emphasis of matter/qualifications given in the Consolidated Independent Auditors Report for the quarter/year ended 31^st March 2023 and management response for the same.

1. Disclaimer of opinion has been expressed in the reports of the Parent Company with regard to the preparation of financial statements. It is observed that there has been a change in the percentage of shares held by the Company in two of its subsidiaries as of March 31, 2023 vis-a-vis March 31, 2019, due to the invocation of shares by the lenders of the subsidiaries. However, while considering the amount invested in the subsidiaries, the Management of the Company has considered the erstwhile shareholding pattern prior to dilution as the Management believes that the change in shareholding is temporary in nature and the shares pledged will be redeemed back by the Company (refer to Note 61 of the consolidated financial statements). However, these shares have been transferred to such lenders before March 31, 2023. We have been informed that the lenders have not sold any of the shares invoked and consequently have not made any adjustments to the loan outstanding. Accordingly, the Management believes that it is not possible to attribute any sale value to the invoked shares.

Consequently, the impact of the said transfer on the book value of invoked shares in the Consolidated financial statements cannot be ascertained.

Further, the impact of the aforesaid on the consolidated financial statement, including but not limited to the profit attributable to the non-controlling interest in the Company, cannot be ascertained. Accordingly, the level of compliance to the requirements of the Indian Accounting Standards cannot be ascertained by us.

Reply: Management believes that the change in shareholding is temporary in nature and the shares pledged will be released back to the Company. Since there is no marketability for the shares invoked management is unable to estimate the impact.

2. In respect of parent company and some of the subsidiaries, attention is drawn to Note 23, Note 23A, Note 29 and Note 57 of the Consolidated financial statements, wherein instances of non-compliance with certain debt covenants including interest & principal repayment defaults have been described. We also draw attention to the fact that the Company has not obtained the balance confirmations on loans from lenders. In the absence of adequate and sufficient audit evidence to establish the amounts payable to the lenders, we are unable to provide our opinion on the correctness of these amounts reflected in the consolidated financial statement and also on their consequential impact including potential tax liabilities. We have been informed that during the year certain lenders have exercised their right to recall the loan and some lenders have initiated legal action to recover dues. However, in the absence of the adequate evidence, we are unable to comment on the consequential adjustments that might impact this Statement on account of non-compliance with debt covenants.

Further, in view of the loan recall notices, legal disputes and pending one-time settlement with the lenders of the group, the parent company, three subsidiaries and one step down subsidiary has not recognised interest on the loans outstanding as of March 31, 2023 aggregated to INR 185.51 Crores. As the loan recall letters provided by the lenders requires payment of interest, penal interest, non-provision of such interest is not in line with the accrual concept of accounting.

Further, We have issued a disclaimer of opinion due to non-provision of interest in the parent company, 2 subsidiary and 1 step down subsidiary and the auditor of 1 subsidiary has emphasised the same, reliance is placed on the books of accounts provided by the Management.

Further We draw Attention to Note 65 of the statement wherein we have issued a disclaimer of opinion due to non-availability of appropriate evidence, confirmation of balances and statement of accounts with regard to borrowings from certain lenders in 2 subsidiary and 1 stepdown subsidiary.

Reply: The Group has borrowings amounting to Rs. 1711 crores as at 31 March 2023. There have been certain covenant breaches with respect to certain borrowings taken by the group from various lenders. Such breaches entitle the lenders to recall the loan. On the date of this statement, there have been certain defaults in repayments of principal and interest of the loans and certain lenders have exercised their rights including recall the loans. In view of the loan recall notices, legal disputes and pending onetime settlement with the lenders of the Group, the Group has not recognized interest.

The order further directed the company to appoint a law firm, of standing and repute, within 60 days of the order to take all necessary steps for recovery of entire dues from MACEL and its related entities, along with due interest, that are outstanding to the subsidiaries. SEBI further directed the company to file a quarterly report with NSE / CDEL Board, detailing the progress in the recovery process.

The tenure of the law firm appointed in terms of sub-para (b) above shall be until the lapse of three months from the date of conclusion of three annual general meetings of CDEL, held after passing of this order or till the dues are recovered, whichever is earlier.

The company appealed against the above order dated 24th January 2023 to the Honble Securities Appellate Tribunal (SAT) which granted stay only on the imposition of penalty.

Further, we have issued a disclaimer of opinion due to the possible impact of the recoverability of dues from MACEL in 1 subsidiary, which in turn has 3 step-down subsidiaries and 2 joint ventures, and in 2 subsidiaries and 2 step-down subsidiaries, based on above.

Further, the auditor of 1 subsidiary has issued a disclaimer of opinion due to the possible impact of the recoverability of dues based on their review.

Reply: the Company appealed the above order dated 24th January 2023 to the Honble Securities Appellate Tribunal (SAT). However, the SAT granted stay on imposition of penalty.

As per the instructions of NSE the Company appointed Independent Law Firm Crest Law on 3rd April 2023 to take effective steps for recovery of dues from MACEL.

Under the above circumstances, no provision is made in the Books of Accounts against the amount receivable from MACEL.

As on 31.03.2023 the amount due by MACEL to various subsidiaries and joint venture of the company amounts Rs.3,419.84 crores.

Reply: The assessment of impairment, if any, remains to be done.

Reply: After reviewing recoverability of the advance, in FY 2019-20, the subsidiaries of the company have created provision Supplier advance and doubtful debts amount to Rs.245 crores. However the efforts for the recovery will continue.

Reply: There is no impact on the financials however the company could not disclose certain details as required under IND AS.

Reply: An agreement for purchase of land at Mumbai had been entered into by the Tanglin Developments Limited (subsidiary) with Mrs.Vasanthi Hegde in FY 2017-18. Based on agreement to purchase the land the Tanglin Developments Limited (subsidiary) has advanced Rs.27,500 Lakhs to Mrs.Vasanthi Hegde. The land in the name of Mrs.Vasanthi Hegde has been acquired by City & Industrial Development Corporation (CIDCO) nodal agency for acquiring land for Navi Mumbai

International Airport. CIDCO has proposed alternative land in lieu of the acquisition of land. However Mrs.Vasanthi Hegde has filed legal case for monetary compensation instead of alternate land.

8. The Consolidated Financial Statements of the Group have been prepared by the Management and Board of Directors using the going concern assumption. The matters detailed in the above paragraphs may have a consequential implication on the Groups ability to continue as a going concern (refer to Note 59 of the Consolidated financial Statements). Further, the material uncertainty over using the Going Concern assumption has also been established by several other component auditors of the Group, as well. However, the Group is confident of meeting its obligations in the normal course of business and accordingly the accounts of the Group have been prepared on a Going Concern Basis.

Further, We have expressed that there is a material uncertainty on going concern in 2 subsidiary, 3 step down subsidiaries and the auditors of the 1 Subsidiary and 2 Step down subsidiaries have also expressed the same in their reports.

Reply: These consolidated financial results for the quarter and year ended 31 March 2023 have been prepared on a going concern basis in view of the positive net worth of the Group amounting to Rs 3,376 crores as of 31 March 2023, significant value in underlying businesses managed by subsidiaries / joint ventures / associates, established track record of the Group to monetize its assets as demonstrated by stake sale in Mindtree Limited , sale of Global Village Tech Park owned by its wholly-owned subsidiary Tanglin Developments Limited, sale of Way2Wealth Group entities, operational efficiencies and consequential ability to service its obligations.

9. We draw attention to the Note 60 of the Statement, wherein the Company has stated that Corporate Insolvency Resolution Process has been initiated in NCLT against one of its key step-subsidiary, M/s. SICAL Logistics Limited (SLL), pursuant to which a final resolution plan has been received vide order dated 08.12.2022. As per the said order read with the approved Resolution Plan, “Nil” payment is payable against the amounts due to related parties of SICAL. the group has written off the amount due from SLL & its group entities of Rs.391.68 crores. As per the NCLT order the equity shares held by the Promoter and Promoter group is extinguished and cancelled. Accordingly the investment in SLL, which is valued based FVTOCI at Rs 7.45 crores, held by 2 step-down subsidiaries as promoters, is fully written off.

Reply: Impact already considered in Financial statements, the auditors have emphasized a factual matter.

10. The Parent Company along with 1 of its subsidiary has entered into an Agreement to sell Way2Wealth Securities Private Limited and its certain subsidiaries to Shriram Ownership Trust (‘the purchaser) (refer Note 47(ii) of the Statement). Based on the agreement, INR 12.10 Crore is receivable by the company in form of preceding years tax refunds and SEBI deposits from the purchaser in form of reimbursement, subject to realisation. Further a sum of INR 2 Crore has been withheld by the purchaser per the agreement. An exceptional profit of INR 15.51 Crore has been recognised in the year 2020-21 on the said sale transaction at the Group level.

Reply: The auditors have emphasized a factual matter. The above are as per agreement with the party.

11. We draw attention in One subsidiary wherein (refer to Note 44 F of the Statement) the outstanding income tax dues of INR 110.3 crores relating to for AY 2019-20 and AY 2020-21.

Reply: Impact already considered in Financial statements, the auditors have emphasized a factual matter.

12. We draw attention to the details of cases filed against the 1 Subsidiary before NCLT (refer Note 45 of the Statement) which was subsequently dismissed.

Reply: The National Company Law Tribunal (NCLT) had dismissed the application by one of the lenders of Coffee Day Global Limited (subsidiary) as a financial creditor for recovery of its dues in the previous quarter. The lender filed an application in NCLAT, appealing against the order.

Another lender, who is a financial creditor of Coffee Day Global Limited (subsidiary), has filed an application with NCLT for recovery of its dues, during the year.

Reply: The Company has applied one time exemption from NBFC provisions to RBI and company is awaiting response from RBI.

Reply: The foreign operating subsidiaries of Coffee Day Global Limited (subsidiary) went into liquidation and accordingly the discontinued operations for the period is nil. However the Coffee Day Global Limited (subsidiary) does not have any additional liability in respect of these limited liability corporations. Further 100% provision in respect of investment in these foreign subsidiaries have already been made, and accordingly there is no further impact on the financial statements of Coffee Day Global Limited (subsidiary).

Reply: The auditor has emphasized a factual matter for which the impact has been addressed in financials.

Reply: The auditor has emphasized a factual matter for which the impact has been addressed in financials.

Reply: The auditor has emphasized a factual matter for which the impact has been addressed in financials

II. Following are the Disclaimers/Emphasis of matter/qualifications given in the Standalone Independent Auditors Report for the quarter/year ended 31^st March 2023 and management response for the same.

1. We have not been provided with sufficient evidence with respect to recoverability of dues from group companies amounting to INR 1,657 Crores (refer Note 7B of the standalone financial statement). Further, we have not been provided appropriate evidence about the recognition of fair value of the estimated loss allowance on corporate guarantee given to its subsidiary as required by Ind AS 109, ‘Financial Instruments. We are therefore unable to comment on the recoverability of the stated balance from group companies, fair value of estimated loss allowance on corporate guarantee given to a subsidiary, and the impact on the standalone financial statement.

Reply: The subsidiaries of CDEL are in the process of disinvestment of their assets. The company is confident that the subsidiaries will repay these advances in due course.

2. It is observed that there has been a change in the percentage of shares held by the Company in two of its subsidiaries as of March 31, 2023, vis-a-vis March 31, 2019, due to the invocation of shares by the lenders of the subsidiaries. However, while considering the amount invested in the subsidiaries, the Management of the Company has considered the erstwhile shareholding pattern prior to dilution as the

Management believes that the change in shareholding is temporary in nature and the shares pledged will be redeemed back by the Company (refer to Note 6 of the standalone financial statement).

However, these shares have been transferred to such lenders before March 31, 2023. We have been informed that the lenders have not sold any of the shares invoked and consequently have not made any adjustments to the loan outstanding. Accordingly, the Management believes that it is not possible to attribute any sale value to the invoked shares. Consequently, the impact of the said transfer on the book value of invoked shares on the standalone financial statements cannot be ascertained.

Reply: Management believes that the change in shareholding is temporary in nature and the shares pledged will be released back to the Company. Since there is no marketability for the shares invoked management is unable to estimate the impact.

3. The Management of the Company has determined that no impairment is required to be recognized on its investments in subsidiaries, associates and joint ventures with a carrying value of INR 1,865 Crore as at March 31, 2023, as required by Ind AS 36, ‘Impairment of Assets, particularly consequent to developments during this period (as detailed in Note 40 of the standalone financial statement). Consequently, the value of investments held by the Company in a subsidiary, which is the holding company of this step subsidiary, is required to be assessed for impairment. We have not been provided with the indicators used and the assessment performed by the Management in not considering impairment in respect of its subsidiaries, associates and joint ventures. We are therefore unable to comment on whether the value of investments recognized in the standalone financial statement is appropriate.

Reply: The valuation of these investments for assessing impairment remains to be done.

4. Attention is drawn to Note 14 of the standalone financial statement, wherein instances of noncompliance with certain debt covenants including interest & principal repayment defaults have been described. We also draw attention to the fact that the Company has not obtained the balance confirmations on loans from lenders. In the absence of adequate and sufficient audit evidence to establish the amounts payable to the lenders, we are unable to provide our opinion on the correctness of these amounts reflected in the standalone financial statement and also on their consequential impact including potential tax liabilities. We have been informed that during the year certain lenders have exercised their right to recall the loan and some lenders have initiated legal action to recover dues. However, in the absence of the adequate evidence, we are unable to comment on the consequential adjustments that might impact this Statement on account of non-compliance with debt covenants.

Further, in view of the loan recall notices, legal disputes and pending one-time settlement with the lenders of the Company, the Management has not recognised interest on the loans outstanding as of March 31, 2023 aggregated to INR 59.97 Crores as detailed in Note 14 of the statement. As the loan recall letters provided by the lenders requires payment of interest and penal interest, non-provision of such interest is not in line with the accrual concept of accounting.

Reply: Management is following up with lenders to get the balance confirmations. This will be taken care of during one time settlement process. There have been certain covenant breaches with respect to borrowings taken by the Company from various lenders. Such covenant breaches entitle the lenders to recall the loan. Some of the lenders have exercised their right to recall the loan and one of the lenders has initiated legal process to recover the dues.

5. The Statement has been prepared by the Management and Board of Directors using the going concern assumption (Refer Note 38 of the standalone financial statement). The matters detailed in the above paragraphs may have a consequential implication on the Companys ability to continue as a going concern. We are therefore unable to comment on whether the going concern basis for preparation of the standalone financial statement is appropriate.

Reply: These standalone financial results for the quarter and year ended 31 March 2023 have been prepared on a going concern basis in view of the positive net worth of the Company amounting to Rs.30,644 million as of 31 March 2023, significant value in diversified portfolio of investments held in subsidiaries / joint ventures / associates, established track record of the Company to monetize the group assets as demonstrated by sale of stake in Mindtree Limited, sale of Global Village Tech Park owned

by its wholly-owned subsidiary Tanglin Developments Limited , sale of stake in Way2Wealth Group entities profitable resorts operations and consequential ability to service the obligations.

Emphasis of Matter

6. Attention is drawn to Note 41 of this statement wherein a final adjudication order dated 24.01.2023 has been served on the company under section 11 (11(4), 11(4A), 11B and 11B ( of the Securities and Exchange Board of India Act, 1992 read with Rule 5 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 by SEBI imposed with a total monetary penalty of Rs.26,00,00,000 (Rupees Twenty-Six Crore) under Section 15HA and Section 15HB of the SEBI Act, 1992 respectively on account of violations of provisions of Section 12A(a), (b) & (c) of the SEBI Act, 1992 read with Regulations 3(b), (c) & (d) and 4(1) of the PFUTP Regulations as stated in Para 59 and 60 of its order relating to the advances to MACEL by the subsidiaries of the Company and in respect of which no provision for the liability has been considered in the accounts.

The order further directed the company to appoint a law firm, of standing and repute, within 60 days of the order to take all necessary steps for recovery of entire dues from MACEL and its related entities, along with due interest, that are outstanding to the subsidiaries. SEBI further directed the company to file a quarterly report with NSE / CDEL Board, detailing the progress in the recovery process. The tenure of the law firm appointed in terms of sub-para (b) above shall be until the lapse of three months from the date of conclusion of three annual general meetings of CDEL, held after passing of this order or till the dues are recovered, whichever is earlier.

The company appealed against the above order dated 24th January 2023 to the Honble Securities Appellate Tribunal (SAT) which granted stay only on the imposition of penalty.

Reply: The auditors has emphasized a factual matter which does not require any accounting adjustments.

7. We draw attention to the Note 39 of the Standalone Financial Statement, wherein the Company has stated that Corporate Insolvency Resolution Process has been initiated in NCLT against one of its key step-subsidiary, M/s. SICAL Logistics Limited (SLL), pursuant to which a final resolution plan has been received vide order dated 09.12.2022. As per the said order read with the approved Resolution Plan, “Nil” payment is payable against the amounts due to related parties of SICAL. Under the above circumstances the company has written off the amount due from SICAL of Rs.0.14 crores.

Reply: Impact already considered in Financial statements, the auditors have emphasized a factual matter.

8. We draw attention to Note 10 of the standalone financial statement, detailing facts relating to the sale of Way2Wealth Securities Private Limited and its certain subsidiaries. Based on the sale agreement, Rs. 4.63 Crore is receivable by the company in form of preceding years tax refunds and SEBI deposits from the purchaser (Shriram Ownership Trust) in form of reimbursement, subject to realisation. Further a sum of Rs. 0.77 Crore has been withheld by the purchaser per the agreement.

Reply: The auditors have emphasized a factual matter. The above are as per agreement with the party

9. As detailed in Note 37 of the standalone financial statement, the Company for the year 2019-20 has filed an application seeking a onetime exemption from registering itself as a Non-Banking Financial Company (NBFC) as required by Section 45-IA of the Reserve Bank of India Act, 1934 and other related provisions. As at the date of this Statement a response from the Reserve Bank of India is awaited. In the absence of such exemption, we are unable to comment on the compliance with the aforesaid regulations and consequential impact, if any on the standalone financial statement.

Reply: Impact already considered in Financial statements, the auditors have emphasized a factual matter.

Risk Management and Assessment:

The Company is exposed to various risks considering the diversified parameters according to the different major business sectors of the Company that is coffee business, and resort business. The Audit Committee oversees the area of financial risks and controls. Major risks identified by the business and functions are systematically

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addressed through mitigating actions on continuing basis. The Company has incorporated sustainability in the process, which helps the Board to align potential exposures with the risk appetite and highlight risks associated with chosen strategies.

Details in respect of frauds reported by Auditors under Section 143(12):

There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of the Act and the rules made thereunder.

Statutory Disclosures:

None of the Directors of your Company are disqualified as per provisions of Section 164(2) of the Companies Act, 2013. Your Directors have made necessary disclosures, as required under various provisions of the Act and SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015.

General Disclosures:

a) Buy back of securities:

In accordance with Section 68 of the Act, the Company has not bought back any of its securities during the year.

b) Sweat Equity:

The Company has not issued any Sweat Equity Shares under the provisions of Section 54 of the Act.

c) Bonus Shares:

In terms of Section 63 of the Act, the Company had not issued Bonus Shares during the year under review.

d) Employee Stock Option Plan:

Pursuant to the provisions of Section 62 of the Act, the Company has not provided any Stock Option to the Employees of the Company.

Appreciation:

The Board acknowledges and places on record its appreciation for the contributions and hard work of Chief Executive Officer, Chief Financial Officer, Company Secretary & Compliance officer and their team specifically in the last 4 years for continued operations and effective interaction with all stakeholders and statutory agencies.

Acknowledgement:

The Directors would like to express their gratitude towards the Companys employees, customers, Banks and institutions, investors and academic partners for their continuous support. They also thank the concerned government departments and agencies for their co-operation. The Directors appreciate and value the contribution made by every member of the ‘Coffee Day family.