DFM Foods Ltd Auditor Reports

To the Members of DFM Foods Limited Report on the Audit of the Financial Statements

QUALIFIED OPINION

We have audited the accompanying financial statements of DFM Foods Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2024, and the Statement of Profit and Loss, including Other Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended, and notes to the financial statements, including material accounting policy information and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us except for the effects of the matters described in the Basis for Qualified opinion section of our report, the aforesaid 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 read with Companies (Indian Accounting Standards) Rules, 2015, as amended ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024, and its loss and other comprehensive income, changes in equity and its cash flows for the year ended on that date.

BASIS FOR QUALIFIED OPINION

The matter in paragraph below should be read along with Note 50 to the accompanying financial statement which describes more fully certain key events took place during the year As explained in Note 50 of the financial statements during the year and subsequent to the year-end, the Company received certain whistleblower complaints through its whistleblower mechanism pertaining to the procurement process. The Audit Committee of the Company engaged an external agency to investigate the whistleblowing allegations. The fact-finding report of the external agency interalia highlighted that procurement of goods and services and related expenses were made at inflated prices due to potential vendor favouritism and potential aggregation/ consolidation of key interlinked/ connected vendors with potential kickbacks to certain ex-employees including former senior official and deviations from company approved policies/ controls. The Audit Committee and the Board of Directors have considered the findings of the fact-finding report along with current managements action plan.

Basis the procedures performed and the enquiries with the management, we observe that the aforesaid fact-finding report of the external agency relied on the information sought and made available however considering the involvement of former senior official, the coverage of vendors selected, limited electronic stored information scanning for fact-finding, use of laptop data of targeted employees instead of the server data, completeness of connected/ interlinked parties, the Company has not been able to assess the effect, if any on the financial statements of the current year including comparative information.

In view of the above, we are unable to assess the adjustments/ disclosures that should have been made in the financial statements of the current year and the comparative information thereof. We conducted our audit of the 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 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 financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our qualified opinion.

INFORMATIONOTHERTHANTHEFINANCIALSTATEMENTS AND AUDITORS REPORT THEREON

The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the, Directors report but does not include the financial statements and our auditors report thereon. Our opinion on the 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 financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. As described in the Basis for Qualified Opinion section above on whistleblower complaints. Accordingly, we are unable to conclude whether or not the other information is materially misstated with respect to this matter.

RESPONSIBILITIES OF MANAGEMENT AND BOARD OF DIRECTORS FOR THE FINANCIAL STATEMENTS

The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Management and 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 the Board of Directors 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 FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the 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 financial statements.

We give in "Annexure A" a detailed description of Auditors responsibilities for Audit of the Financial Statements.

OTHER MATTER

The financial statements of the Company for the year ended March 31, 2023, were audited by another auditor whose report dated October 28, 2023 expressed an unmodified opinion on those statements.

Our opinion is not modified in respect of this matters.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

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

2. As required by Section 143(3) of the Act, we report that: (a) We have sought and except for the matters described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

(b) Except for the effects of the matter described in the Basis of Qualified Opinion section above and the matters stated in the paragraph para 2(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rule, 2014, 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 Flow dealt with by this Report are in agreement with the books of account. Reference is drawn to Para (b) of Basis of Adverse Opinion given in Annexure C to the Independent Auditors Report. (d) Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph and Para (b) of Basis of Adverse Opinion given in Annexure C to the

Independent Auditors Report, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards 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 are disqualified as on March 31, 2024 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) The matter described in the Basis for Qualified Opinion paragraph above and Basis for Adverse Opinion paragraph in the Annexure C to our Audit Report, in our opinion, may have an adverse effect on the functioning of the Company.

(g) The reservation relating to the maintenance of accounts and other matters connected therewith are as stated in paragraph 2(b) above on reporting under Section 143(3)(b) and paragraph 2(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rule, 2014.

(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, 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 financial statements

Refer Note 28 to the 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 34 to the financial statement; 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 53 to the financial statement. iv. A. The Management has represented that, to the best of its 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(s) or entity(ies), 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 identifiedin any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide guarantee, security or the like on behalf of the Ultimate Beneficiaries.

B. The Management has represented, that, to the best of its knowledge and belief, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (Funding Parties), with the understanding, whether recorded in writing or otherwise, as on the date of this audit report, 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, and according to the information and explanations provided to us by the Management in this regard, 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 (1) and (2) above, contain any material mis-statement. v. The Company has neither declared nor paid any dividend during the year. vi. The reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 is applicable from April 01, 2023 Based on our examination which included test checks, except for the instances mentioned below, 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 respective software: A. In regard to the ERP Next: Based on our examination, the Company has used an accounting software for maintaining its books of account pertaining to accounting transections recorded during the year ended March 31, 2024, which has a feature of recording audit trail (edit log) facility, except that the audit trail feature was not enabled and operated throughout the year for all relevant transactions recorded in the software. Also, we are unable to comment as to whether there were any instances of the audit trail feature been tampered with.

B. In regard to the Darwin Box: Based on our examination, the Company has used an accounting software for maintaining its books of account pertaining to payroll processing during the year ended March 31, 2024, which has a feature of recording audit trail (edit log) facility at the application level. The said audit trail feature has been enabled and operated throughout the year for all the relevant transactions recorded in the accounting software at the application level. Also, during the course of our examination, we did not come across any instance of the audit trail feature being tampered with at application level.

However, with respect to the said accounting software at the database level, the same has been managed and maintained by a third-party software service provider, and in the absence of independent service auditors report of the service organisation, we are unable to conclude whether the accounting software has a feature of recording audit trail (edit log) facility at the database level to log any direct data changes nor are we able to comment whether the audit trail feature was enabled in the said software and has been operated throughout the year for all relevant transactions recorded in the software at the database level. Also, we are unable to comment as to whether there were any instances of the audit trail feature been tampered with, at the database level.

C. In regard to the Bizom:

Based on our examination, the Company has used an accounting software for maintaining its books of accounts which pertains to schemes and claims during the year ended March 31, 2024, which is managed and maintained by a third-party software service provider. Further, in the absence of coverage of audit trail in the independent service auditors report of the service organisation, we are unable to comment whether the said software has a feature of recording audit trail (edit log) facility, nor are we able to comment on whether the audit trail feature was enabled in the said software and has been operated throughout the year for all relevant transactions recorded in the software. Also, we are unable to comment as to whether there were any instances of the audit trail feature been tampered with.

3. 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 read with Schedule V of the Act, wherein as per the requirements of sub section 4 of section 197 special resolutions were passed by the company in the respective general meetings.

Annexure "A" to the Independent Auditors Report on Even Date on The Financial Statements of DFM Foods Limited

Auditors Responsibilities for the Audit of the 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 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 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 financial statements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management and Board of Directors.

• Conclude on the appropriateness of management 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 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 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 financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant including any significant deficiencies 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.

Annexure B to Independent Auditors Report of Even Date on The Financial Statements of DFM Foods Limited for The Year Ended March 31, 2024

[Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements in the Independent Auditors Report] i. (a) A The Company has maintained proper records showing full particulars including quantitative details and situation of property, plant and equipment and relevant details of right-of-use assets.

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

(b) Property, Plant and Equipment and right of use assets have been physically verified by the management at during the year and no material discrepancies were identified on such verification.

(c) With respect to immovable properties disclosed in the financial statements included in Property, Plant and Equipment, according to the information and explanations given to us and based on the examination of the registered sale deed/ conveyance deed provided to us, we report that, the title deeds of such immovable properties are held in the name of the Company as at the balance sheet date. In respect of immovable properties of land that have been taken on lease and disclosed in the financial statements as Right of Use assets as at the balance sheet date, (i) the lease agreements are duly executed in favour of the Company and (ii) Immovable properties of land whose title deeds have been pledged as security for loans, are held in the name of the Company based on the confirmations directly received by us from lender.

(d) According to the information and explanations given to us, the Company has not revalued its property, plant and Equipment (including Right of Use assets) and intangible assets during the year. Accordingly, the provisions stated under clause 3(i)(d) of the Order are not applicable to the Company. (e) According to the information and explanations given to us, no proceeding has been initiated or pending against the

Company for holding benami property under the Benami Transactions (Prohibition)

Act, 1988, as amended and rules made thereunder. Accordingly, the provisions stated under clause 3(i)(e) of the Order are not applicable to the Company. ii. (a) The inventory except goods in transit has been physically verified during the year by the management. In our opinion, the frequency of verification, coverage and procedure of such verification is reasonable and appropriate having regard to the size of the Company and the nature of its operations. The discrepancies noticed on physical verification of inventory as compared to book records were not 10% or more in aggregate for each class of inventory. For goods in transit, we have verified delivery receipts subsequent to the year end.

(b) The Company has been sanctioned working capital limits in excess of Rs. 5 crores in aggregate from Banks on the basis of security of current assets. The Company has not filed quarterly returns / statements with such Banks. Accordingly, we are unable to comment on the filing of returns/ statements and whether they are in agreement with books and accounts of the Company. iii. (a) According to the information explanation provided to us, 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. Accordingly, the provisions stated under clause 3(iii)(a), (c), (d), (e) and (f) of the Order are not applicable to the Company.

(b) According to the information and explanations given to us and based on the audit procedures performed by us, we are of the opinion that the investments made, is not prejudicial to the interest of the Company. Further, the Company has not granted any loans or advances during the year in the nature of loans accordingly reporting on clause (b) on loans and advances is not applicable. iv. According to the information and explanations given to us, there are no loans, guarantees, and security in respect of which provisions of sections 185 and 186 of the Companies Act, 2013. In respect of the investments made by the Company during the year, the Company has complied with the provisions of section 186 of the Companies Act, 2013. v. According to the information and explanations given to us, the Company has neither accepted any deposits from the public nor any amounts which are deemed to be deposits, within the meaning of Sections 73, 74, 75 and 76 of the Companies Act, 2013 and the rules framed there under. Accordingly, the provisions stated under clause 3(v) of the Order is not applicable to the Company. Also, there are no amounts outstanding as on March 31, 2024, which are in the nature of deposits. vi. The provisions of sub-Section (1) of Section 148 of the Companies Act, 2013 are not applicable to the Company as the Central Government of India has not specified the maintenance of cost records for any of the products/ services of the Company. Accordingly, the provisions stated under clause 3(vi) of the Order are not applicable to the Company. vii. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, undisputed statutory dues including goods and services tax, provident fund, employees state insurance, income-tax, duty of customs, cess, and other statutory dues have been regularly deposited by the Company with appropriate authorities in all cases during the year.

There are no undisputed amounts payable in respect of Goods and Services tax, provident fund, employees state insurance, income-tax, duty of customs, cess, and other statutory dues in arrears as at March 31, 2024, outstanding for a period of more than six months from the date they became payable. Dues payable on account of withholding tax amounting to INR 5 lakhs* and INR 20 lakhs on account of Export Promotion for Capital Goods liability are outstanding for a period of more than 6 months

*Amount appears on the Income Tax Portal under Traces.

(b) According to the information and explanation given to us and examination of records of the Company, details of statutory dues referred to in sub-clause (a) above which have not been deposited as on March 31, 2024, on account of any dispute, are as follows:

Name of the statute	Nature of dues	Amount Demanded INR (in lakhs)	Amount Paid INR (in lakhs)	Period to which the amount relates	Forum where dispute is pending	Remarks, if any
Central Goods and Service tax Act, 2017	Goods and Service tax (GST)	28,982	1,008	July 2017 to March 2021	Appellate Authority, Central Goods and Service Tax, Ghaziabad	Amount Paid under protest
Central Goods and Service tax Act, 2017	Goods and Service tax (GST)	114	-	2017-18	Commissioner	No remarks
Income Tax Act, 1961	Income tax	46	-	2020-21	CIT (A)	Not Applicable
Income Tax Act, 1961	Income tax	54	-	2017-18	CIT (A)	Not Applicable

viii. According to the information and explanations given to us, there are no transactions which are not accounted in the books of account which have been surrendered or disclosed as income during the year in Income-tax Assessment of the Company. Accordingly, the provision stated under clause 3(viii) of the Order is not applicable to the Company. ix. (a) In our opinion and according to the information and explanations given to us and the records of the Company examined by us, the Company has not defaulted in repayment of loans or borrowings or in payment of interest thereon to any lender. (b) According to the information and explanations given to us and on the basis of our audit procedures, we report that the Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority. (c) In our opinion and according to the information and explanations provided to us, the Company has not taken any term loan during the year and there are no unutilised term loans at the beginning of the year and hence, reporting under clause (ix) (c) of the order is not applicable. (d) According to the information and explanations given to us, and the procedures performed by us, and on an overall examination of the financial statements of the Company, we report that no funds raised on short-term basis have been used for long-term purposes by the Company. (e) The Company does not have any subsidiary, associate, or joint venture. Accordingly, reporting under clause 3(ix)(e) of the order is not applicable to the Company. (f) According to the information and explanations given to us and procedures performed by us, we report that the Company does not have any subsidiary, associate, or joint venture. Accordingly, no loan has been raised loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies and reporting under Clause 3(ix)(f) of the order is not applicable to the Company. x. (a) In our opinion and according to the information explanation given to us, the Company did not raise any money by way of initial public offer or further public offer (including debt instruments) during the year. Accordingly, the provisions stated under clause 3(x)(a) of the Order are not applicable to the Company.

(b) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully, partly, or optionally convertible debentures during the year. Accordingly, the provisions stated under clause 3(x)(b) of the Order are not applicable to the Company. xi. (a) During the course of our examination of the books and records of the company carried out in accordance with the generally accepted accounting practices in India, we were informed of certain allegations which the Company has received through the whistle blower mechanism which has been considered by us for any bearing on our audit report and reporting under this clause. (‘Refer to ‘Basis for Qualified Opinion section to the Independent Auditors Report and Note 50 to the financial statements) (b) A report under section 143(12) of the Companies Act, 2013, has been filed by us in the Form ADT-4 as prescribed under rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government. (‘Refer to ‘Basis for Qualified Opinion section to the Independent Auditors Report and Note 50 to the financial statements) (c) We have taken into consideration the whistle blower complaints received by the Company during the year and shared with us for reporting under this clause, while determining the nature, timing, and extent of audit procedures. (‘Refer to ‘Basis for Qualified Opinion section to the Independent Auditors Report and Note 50 to the financial statements) xii. The Company is not a Nidhi Company. Accordingly, the provisions stated under clause 3(xii)(a) to (c) of the Order are not applicable to the Company. xiii. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with Sections 177 and 188 of the Companies Act, 2013, where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards. xiv. (a) In our opinion and based on our examination, the Company has an internal audit system as required under Section 138 of the Companies Act, 2013. Further, owing to our ‘Basis of our Adverse Opinion on Internal Financial Controls the process of Internal audit function is not commensurate with the size of the Company and nature of its business.

(b) The reports of the Internal Auditor for the period under audit have been considered by us. xv. According to the information and explanations given to us, in our opinion, during the year, the Company has not entered into any non-cash transactions with directors or persons connected with its directors and accordingly, the reporting on compliance with the provisions of Section 192 of the Companies Act, 2013 in clause 3(xv) of the Order is not applicable to the Company. xvi. (a) The Company is not required to be registered under Section 45 IA of the Reserve Bank of India Act, 1934 (2 of 1934) and accordingly, the provisions stated under clause 3(xvi) (a) of the Order are not applicable to the Company.

(b) The Company is not engaged in any Non-Banking Financial or Housing Finance activities during the year and accordingly, the provisions stated under clause 3 (xvi)

(b) of the Order are not applicable to the Company.

(c) The Company is not a Core investment Company (CIC) as defined in the regulations made by Reserve Bank of India. Accordingly, the provisions stated under clause 3 (xvi) (c) of the Order are not applicable to the Company. (d) There are no other Companies part of the Group. Accordingly, the provisions stated under clause 3(xvi)(d) of the Order are not applicable to the Company. xvii. Based on the overall review of financial statements, the Company has incurred cash losses amounting to INR 4,262 lakhs during the immediately preceding financial year but has not incurred any cash losses during the current financial year. xviii. There has been no resignation of the statutory auditors during the year. Accordingly, the provisions stated under clause 3(xviii) of the Order are not applicable to the Company. However, auditor has been changed during the year as a result of outgoing auditor completing their term of appointment. xix. According to the information and explanations given to us and on the basis of the financial ratios (as disclosed in note 44 to the financialstatements), ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the financial statements, 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 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 (refer note 44 to the financial statements). 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. xx. According to the information and explanations given to us and based on our verification, provisions of Section 135 of the Companies Act, 2013, are not applicable to the Company during the year. Accordingly, reporting under clause 3(xx) of the Order is not applicable for the year. xxi. According to the information and explanations given to us, the Company does not have any Subsidiary, Associate or Joint Venture. Accordingly, reporting under clause 3(xxi) of the Order is not applicable.

[Referred to in paragraph 2(f) under ‘Report on Other Legal and Regulatory Requirements in the Independent Auditors Report of even date to the Members of DFM Foods Limited on the Financial Statements for the year ended March 31, 2024]

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls with reference to financial statements of DFM Foods Limited ("the Company") as of March 31, 2024 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

ADVERSE OPINION

In our opinion, because of the possible effects of the material weaknesses described below in the ‘Basis for Adverse Opinion on the achievement of the objectives of the control criteria, the Company has not maintained adequate internal financial controls with reference to financial statements and such internal financial controls with reference to financial statements were not operating effectively as of March 31, 2024, based on the internal control with reference to financial statements criteria established by the Company considering the essential components of internal control stated in Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI) (the "Guidance Note").

We have considered the material weaknesses identified and reported below in determining the nature, timing, and extent of audit tests applied in our audit of the

March 31, 2024 financial statements of the Company, and these material weaknesses does not affect our opinion on the financial statements of the Company.

BASIS FOR ADVERSE OPINION

According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified as at March 31, 2024: a) We draw attention to Note 50 to the financial statements and the "Basis for Qualified Opinion" section of our Audit Report on the financial statements, which describe various matters relating to systemic lapses in procurement process including procurement at inflated prices, vendor favouritism, vendor diligence, purchase order approval system and deviations from company approved policies and procedures. These systemic lapses could potentially result in material inaccuracies or errors in the Companys trade payables, consumption, inventory and related expense account balances. b) The review mechanism of the Company particularly the maker-checker for a large number of transactions entered during the year was ineffective. Further, documentary evidence to support approval of transactions was not available with the Company. This could potentially result in recording of unauthorised / unapproved transactions. c) The Company used generic login IDs that were accessed by multiple users. Further, the Company did not have transaction logs to evidence initiation/ approval of transactions while using generic login IDs. This could potentially result in recording of unauthorised / unapproved transactions. d) The Company migrated to a new ERP system with effect from April 1, 2023, however Information Technology General Controls with respect to Access Management and Change Management were ineffective and accordingly no reliance could be placed on Information Technology General Controls. e) The Companys internal financial controls relating to financial statements closure process including identification of appropriate year end closing entries, assessment of the creation/reversal of provision for expenses, review of open purchase orders and interbranch reconciliations were not operating effectively. This could potentially be a risk in the financial statements, including non-compliance with applicable accounting standards.

A ‘material weakness is a deficiency, of deficiencies, in internal financial control with reference to financial statements, such that there is a reasonable possibility that a material misstatement of the companys annual or interim financial statements will not be prevented or detected on a timely basis. We have considered the material weakness identified and reported in point no (a) above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2024 financial statements of the Company, and that material weakness affect our opinion on the financial statements of the Company and we have issued a qualified opinion on the financial statements with respect to that matter.

We have considered the material weaknesses identified and reported in point (b), (c), (d), (e) in determining the nature, timing, and extent of audit tests applied in our audit of the financial statements of the Company for the year ended on March 31, 2024, and these material weaknesses does not affect our opinion on the financial statements of the Company.

MANAGEMENT AND BOARD OF DIRECTORS 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 control with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note. 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 Act.

AUDITORS RESPONSIBILITY

Our responsibility is to express an opinion on the Companys internal financial controls with reference to financial statements based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls. 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 financial statements was 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 financial statements and their operating effectiveness. Our audit of internal financial controls with reference to financial statements included obtaining an understanding of internal financial controls with reference to financial statements, 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 judgement, 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 adverse audit opinion on the Companys internal financial controls with reference to financial statements.

MEANING OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS

A companys internal financial control with reference to financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial control with reference to 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 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 financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS

Because of the inherent limitations of internal financial controls with reference to 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 financial statements to future periods are subject to the risk that the internal financial control with reference to financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

For M S K A & Associates

Chartered Accountants

ICAI Firm Registration

No. 105047W

 

	Amit Mitra
	Partner
Place: Gurugram	Membership No. 094518
Date: December 07, 2024	UDIN: 24094518BKGXDK4530