To the Members of FSN E-Commerce Ventures Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of FSN E-Commerce Ventures Limited ("the Company") which comprise the Balance Sheet as at March 31, 2022, the Statement of Profit and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013, as amended ("the Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2022, its profits including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs), as specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in the ‘Auditors Responsibilities for the Audit of the Standalone financial statements section of our report.
We are independent of the Company in accordance with the ‘Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the 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 we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the 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 for the financial year ended March 31, 2022. 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. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matter to be communicated in our report. We have fulfilled the responsibilities described in the Auditors responsibilities for the audit of the standalone financial statements section of our report, including in relation to this matter. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying standalone financial statements.
Impairment of investments in and loans to subsidiaries (refer Note 7, Note 8 and Note 16 in the standalone financial statements)
|Key audit matters||How our audit addressed the key audit matter|
|The Company has investment of H 3,794.80 million in subsidiaries and has outstanding loans receivables of H 5,080.51 million from subsidiaries as at March 31, 2022 (as described in Note 7, Note 8 and Note 16 of standalone financial statements).||Our audit procedures included the following:|
|As per requirement of Ind AS 36 "Impairment of assets", the management reviews at each reporting period whether there are any indicators of impairment of the investments in subsidiaries and where impairment indicators exist, such investments are tested for impairment using discounted cash-flow models by which recoverable value of each investment is compared to the carrying value as at balance sheet date. A deficit between the recoverable value/ value in use and the carrying value would result in impairment.||• We obtained the audited financial statements of subsidiaries from the management and assessed impairment indicators in accordance with Ind AS 36.|
|The value in use of the underlying businesses is determined based on the discounted cash flow projections. Discounted cash flow model has significant judgment and estimation in respect of cash flow forecasts and discount rate. Changes in certain methodologies and assumptions can lead to significant changes in the assessment of the recoverable value.||• Assessed the Companys valuation methodology applied in determining the recoverable amount.|
|Due to the level of judgements involved in the assumptions used for computation of recoverable amount/ value in use, the impairment assessment of the Companys interest in certain subsidiaries including loans given, is determined to be a key audit matter in our audit of the standalone financial statements.||• Assessed the assumptions used in determining cash flow forecasts, discount rates, expected growth rates and terminal growth rates used.|
|• Where the Company used the work of an external specialist, we assessed competence, professional qualification, objectivity and independence of such specialist. We obtained and read the report of external specialist to understand the work performed on testing of key assumptions and estimates and their outcome of testing.|
|• Involved our internal valuation specialist to evaluate the adequacy of the assumptions used in impairment analysis.|
|• We assessed the recoverable value headroom by performing sensitivity testing of key assumptions used.|
|• Discussed the budgeted and actual performance for the year to evaluate the inputs and assumptions used in the cash flow forecasts.|
|• Tested the arithmetical accuracy of the computation of recoverable amount.|
|• We assessed the disclosures provided by the Company in relation to its annual impairment test in notes to the standalone financial statements.|
Put arrangements over non- controlling interests (Refer Note 22 in the standalone financial statements)
|Our audit procedures included the following:|
|The Company has acquired 51% shareholding of Dot & Key Wellness Private Limited (‘D&K) on September 28, 2021. The promoter shareholders of D&K have put option for acquisition of incremental stake up to 49% by the Company at a value to be determined as per the terms of shareholders agreement for consideration not exceeding Rs. 1,530 million. The fair value of put option as at March 31, 2022 is Rs. 242.40 million.||• We have, amongst others, read the shareholders agreement and share subscription and purchase agreement, and other related documents to obtain an understanding of the transactions and the key terms and conditions.|
|In accordance with Ind AS 109, the put option value is required to be fair valued at each reporting date. The inputs to the put option valuation include projected revenue growth, budgeted operating margins and operating cash-flows, pre-tax discount rates and terminal value.||• Read the valuation report for the purchase price allocation. We evaluated the qualifications and objectivity of the experts engaged by the Company to perform the put option valuation.|
|We considered the audit of this put arrangement to be a key audit matter as this is a significant non routine transaction during the year and it requires significant management judgement regarding the estimated revenue and EBITDA of future years including the fair valuation of put option liability||• We assessed management assumptions in respect of future sales growth rate and discount rate used in valuation. We involved our valuation specialists to assist in evaluating the key assumptions and methodologies used in the valuation.|
|• We assessed the disclosures made in the Standalone financial statements.|
Information Other than the Financial Statements and Auditors Report Thereon
The Companys Board of Directors is responsible for the other information. The other information comprises the Directors report but does not include the standalone financial statements and our auditors report thereon, which we obtained prior to the date of this auditors report, and the Annual report other than Directors report , which is expected to be made available to us after that date
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether such 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. We have nothing to report in this regard.
When we read the Annual report other than Directors report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and determine the actions under the applicable laws and regulations.
Responsibilities of Management for the standalone 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 standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. 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 the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, Management is responsible for assessing the 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.
Those Board ofDirectors 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 professionaljudgment 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 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.
• Conclude on the appropriateness of Managements 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.
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
Annexure 1 referred to in paragraph  under Report on Other Legal and Regulatory Requirements of our report of even date
Re: FSN E-Commerce Ventures Limited (the "Company")
In terms of the information and explanations sought by us and given by the Company and the books of account and records examined by us in the normal course of audit and to the best of our knowledge and belief, we state that:
(i) (a) (A) The Company has maintained proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment, except for quantitative and description details of additions made during the year. The Company is in the process of updating quantitative and description details of additions during the year.
(B) The Company has maintained proper records showing full particulars of intangibles assets.
(b) All Property, Plant and Equipment have not been physically verified by the management during the year but there is a regular programme of verification in a phased manner over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, some property, plant and equipment were physically verified during the year. No material discrepancies were noticed on such verification.
(c) There is no immovable property (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee), held by the Company and accordingly, the requirement to report on clause 3(i)(c) of the Order is not applicable to the Company.
(d) The Company has not revalued its Property, Plant and Equipment (including Right of use assets) or intangible assets during the year ended March 31, 2022 and accordingly, the
(e) According to the information and explanations given to us and on the basis of our examination of the records of the Company, there are no proceedings initiated or are pending against the Company for holding any benami property under the Prohibition of Benami Property Transactions Act, 1988 and rules made thereunder and accordingly, the requirement to report on clause 3(i)(c) of the Order is not applicable to the Company.
(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year. In our opinion the coverage and the procedure of such verification by the management is appropriate. Discrepancies were less than 10% in /aggregate for each class of inventory and have been properly dealt with in the books of account.
(b) As disclosed in note 24 to the standalone financial statements, the Company has been sanctioned working capital limits in excess of five crores in aggregate from banks and/or financial institutions during the year on the basis of security of current assets of the Company. Based on the records examined by us in the normal course of audit of the standalone financial statements, the quarterly returns/statements filed by the Company with such banks and financial institutions are not in agreement with the books of accounts of the Company and the details are as follows:
(Rs. in Million)
|For each class of current asset as at quarter ended||Value as per books||Value as per quarterly return/ statement||Discrepancy|
|June 30, 2021:|
|Trade Receivables and advance to Supplier|
|Kotak Bank, HDFC Bank, Citibank||463.45||416.60||46.85|
|Kotak Bank, HDFC Bank, Citibank||351.43||373.83||(22.40)|
|September 30, 2021:|
|Trade receivable, Other Receivable|
|Citibank, Kotak Bank||401.67||306.58||95.09|
|For each class of current asset as at quarter ended||Value as per books||Value as per quarterly return/ statement||Discrepancy|
|Trade receivable, Advance to Supplier, Other Receivable|
|Citibank, Kotak Bank, HDFC Bank||401.38||396.19||5.19|
|Advances to supplier|
|Citibank, Kotak Bank||84.32||29.61||54.71|
|December 31, 2021:|
|Trade receivable, Other Receivable|
|Citibank, Kotak Bank, HDFC Bank||507.97||601.39||(93.42)|
|March 31, 2022:|
|Citibank, Kotak Bank||725.45||760.91||(35.46)|
#Note : Kotak Bank, Citibank, HDFC Bank referred in the above in the table are for Kotak Mahindra Bank Limited, Citibank N.A., HDFC Bank Limited
(iii) (a) During the year, the Company has provided loans and stood guarantees to its subsidiaries as follows:
(Rs in Million)
|Aggregate amount granted/ provided during the year||500.00||5,610.00|
|Balance outstanding as at March 31, 2022 in respect of above cases||3,540.00||5,238.65|
During the year, the Company has not provided security to companies, firms, Limited Liability Partnerships or any other parties.
(b) During the year, the investments made, guarantees provided and the terms and conditions of the grant of all loans and guarantees to its subsidiaries are not prejudicial to the Companys interest. During the year, the Company has not provided security to companies, firms, Limited Liability Partnerships or any other parties. Accordingly, the requirement to report on clause 3(iii)(b) of the Order in respect of security given is not applicable to the Company.
(c) The Company has granted loans during the year to its subsidiaries where the schedule of repayment of principal and payment of interest has been stipulated and the repayment or receipts are regular.
(d) There are no amounts of loans and advances in the nature of loans granted to companies, firms, limited liability partnerships or any other parties which are overdue for more than ninety days.
(e) There were no loans or advance in the nature of loan granted to companies which was fallen due during the year, that have been renewed
or extended or fresh loans granted to settle the overdues of existing loans given to the same parties.
(f) The Company has not granted any loans or advances in the nature of loans, either repayable on demand or without specifying any terms or period of repayment to companies. Accordingly, the requirement to report on clause 3(iii)(f) of the Order is not applicable to the Company.
(iv) In our opinion and according to the information and explanations given to us, provisions of section 185 and 186 of the Act in respect of loans to entities in which directors are interested and in respect of loans and advances given, investments made, guarantees and securities given have been complied with by the Company. The Company has not advanced loans to directors to which provisions of section 185 of the Act apply and hence not commented upon.
(v) The Company has neither accepted any deposits from the public nor accepted any amounts which are deemed to be deposits within the meaning of sections 73 to 76 of the Act and the rules made thereunder, to the extent applicable. Accordingly, the requirement to report on clause 3(v) of the Order is not applicable to the Company.
(vi) The Company is not in the business of sale of any goods or provision of such services as prescribed by the Central Government under section 148(1) of the Act. Accordingly, the requirement to report on clause 3(vi) of the Order is not applicable to the Company.
(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company is generally regular in depositing undisputed statutory dues including provident fund, employees state insurance, income tax, duty of customs, goods and service tax, cess and any other statutory dues to the appropriate authorities. According to the information and explanations given to us and based on audit procedures performed by us, no undisputed amounts payable in respect of these statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable. The provisions relating to duty of excise, sales tax, service tax and value added tax are not applicable to the Company for the year ended March 31, 2022.
(b) According to the records of the Company, there are no dues of goods and services tax, provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of custom, duty of excise, cess and other statutory dues which have not been deposited on account of any disputes. The dues of value added tax have not been deposited on account of any dispute, are as follows:
(Rs in Million)
|Name of the statute||Nature of dues||Amount||Period to which the amount relates||Forum where the dispute is pending|
|Delhi Value Added Tax, 2002||DVAT||6.15||April 2016 to March 2017||CIT Appeals|
|Maharashtra Value Added Tax, 2002||MVAT||20.49||April 2016 to March 2017||Deputy Commissioner of Sales Tax|
(viii) The Company has not surrendered or disclosed any transaction, previously unrecorded in the books of account, in the tax assessments under the Income Tax Act, 1961 as income during the year. Accordingly, the requirement to report on clause 3(viii) of the Order is not applicable to the Company.
(ix) (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 government or any government authority.
(c) The Company did not have any term loans outstanding during the year hence, the requirement to report on clause (ix)(c) of the Order is not applicable to the Company.
(d) On an overall examination of the financial statements of the Company, no funds raised on short-term basis have been used for long-term purposes by the Company.
(e) On an overall examination of the standalone financial statements of the Company, the Company has not taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries.
(f) The Company has not raised loans during the year on the pledge of securities held in its subsidiary companies. Hence, the requirement to report on clause 3(ix)(f) of the Order is not applicable to the Company.
(x) (a) Monies raised during the year by the Company by way of initial public offer were applied for the purpose for which they were raised, though idle/surplus funds which were not required for immediate utilisation have been invested in fixed deposits. The maximum amount of idle/surplus funds invested during the year was H 6,000.00 Mn of which H 3,661.27 Mn was outstanding at the end of the year.
(b) The Company has complied with provisions of sections 42 and section 62 of the Act in respect of the private placement of optionally convertible preference shares respectively during the year. The funds raised, have been used for the purposes for which the funds were raised.
(xi) (a) No fraud by the Company or no fraud on the Company has been noticed or reported during the year.
(b) During the year, no report under sub-section (12) of section 143 of the Act, 2013 has been filed by the secretarial auditor or by us in Form ADT - 4 as prescribed under Rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government.
(c) As represented to us by the management, there are no whistle blower complaints received by the Company during the year.
(xii) In our opinion, the Company is not a nidhi company as per the provisions of the Act. Therefore, the provisions of clause 3(xii)(a) of the Order are not applicable to the Company and hence not commented upon.
(xiii) Transactions with the related parties are in compliance with sections 177 and 188 of Act where applicable and the details have been disclosed in the notes to the standalone financial statements, as required by the applicable accounting standards.
(xiv) (a) The Company has an internal audit system commensurate with the size and nature of its business.
(b) The internal audit reports of the Company issued till the date of the audit report, for the period under audit have been considered by us.
(xv) According to the information and explanations given to us and on the basis of our examination of the records, the Company has not entered into any non-cash transactions with its directors or persons connected with its directors and hence requirement to report on clause 3(xv) of the Order is not applicable to the Company.
(xvi) (a) The provisions of section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934) are not applicable to the Company. Accordingly, the requirement to report on clause (xvi)(a) of the Order is not applicable to the Company.
(b) The Company is not engaged in any NonBanking Financial or Housing Finance activities. Accordingly, the requirement to report on clause (xvi)(b) of the Order is not applicable to the Company.
(c) The Company is not a Core Investment Company as defined in the regulations made by Reserve Bank of India. Accordingly, the requirement to report on clause 3(xvi)(c) of the Order is not applicable to the Company.
(d) There is no Core Investment Company as a part of the Group, hence, the requirement to report on clause 3(xvi)(d) of the Order is not applicable to the Company.
(xvii) The Company has not incurred cash losses in the current year. The Company has not incurred cash losses in the immediately preceding financial year.
(xviii) There has been no resignation of the statutory auditors during the year and accordingly requirement to report on clause 3(xviii) of the Order is not applicable to the Company.
(xix) On the basis of the financial ratios disclosed in note 51 to the standalone financial statements, ageing and expected dates of realisation of financial assets and payment of financial liabilities, other information accompanying the standalone 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. 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) (a) In respect of other than ongoing projects, there are no unspent amounts that are required to be transferred to a fund specified in Schedule VII of the Act, in compliance with second proviso to sub section 5 of section 135 of the Act. This matter has been disclosed in note 54 to the standalone financial statements.
(b) All amounts that are unspent under section (5) of section 135 of Companies Act, pursuant to any ongoing project, has been transferred to special account in compliance of with provisions of sub section (6) of section 135 of the said Act. This matter has been disclosed in note 54 to the standalone financial statements.
|For S.R. Batliboi & Associates LLP||For V. C. Shah & Co.|
|Chartered Accountants||Chartered Accountants|
|ICAI Firm Registration Number:||ICAI Firm Registration Number:|
|per Vineet Kedia||per A. N. Shah|
|Membership Number: 212230||Membership Number: 42649|
|Place: Mumbai||Place: Mumbai|
|Date: May 27, 2022||Date: May 27, 2022|