NEL Holdings South Auditors Report


To the Members of

Satchmo Holdings Limited

(Formerly known as NEL Holdings South Limited)

Report on the Audit of the Standalone Financial Statements Adverse

Opinion

We have audited the standalone financial statements of Satchmo Holdings Limited (formerly known as NEL Holdings South Limited and hereinafter referred as "the Company"), which comprise the Balance Sheet as at 31st March 2024, the Statement of Profit and Loss, Statement of Changes in Equity and Statement of Cash Flows for the year then ended, and notes to the standalone financial statement, including a summary of material accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Adverse Opinion paragraph below, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and due to the significance of matter described in the Basis for Adverse Opinion paragraph given below, the accompanying standalone financial statements do not give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024, and its profit, changes in equity and its cash flows for the year ended on that date.

Basis for Adverse Opinion

The Company has incurred losses over the years resulting in negative net worth and negative working capital. The default in payment of dues to banks and financial institutions and creditors etc. are the identified events that, individually or collectively, may cast significant doubt on the Companys ability to continue as a going concern. The Statement does not adequately disclose this fact.

The Company has stepped back / separated from certain projects under development and has transferred those projects to other developers/ landowners through the Memorandum of Understanding (MOU) or Business Transfer Agreement (BTA). Although these transactions have reduced the liability of the Company to banks and financial institutions, the ability of the Company to continue as a going concern remains uncertain in view of the negative net worth.

As the Company has not recognized this fact and has prepared the standalone financial statements on a going concern assumption basis without carrying out any adjustments, in our opinion, the standalone financial statements may not give a true and fair view. (Refer to note no. 44 of the standalone financial statements)

Other matters that require a modification to the opinion:

1) Year-end balance confirmation in respect of trade receivables, trade payables, vendor advances, advances from customers and other advances have not been provided for our verification and record for all the parties. In the absence of such confirmation, we are unable to ascertain any consequential effect of the above to the standalone financial statements for the year. As explained, necessary mails have been sent to some of the parties for confirmation. However, no replies have been received in this regard except in few cases.

2) As per the records of the Company and information and explanations provided to us, the Company has been irregular in depositing the undisputed statutory dues, including provident fund, income-tax, value-added tax, Goods and Services tax, cess, etc.

The Company also has a receivable balance of Rs. 768 Lakh and a payable balance of Rs. 177 Lakh (excluding interest and disputed VAT liability under appeal) from/ to various government authorities. Due to such statutory non-compliance, we are unable to comment on the actual recoverability and payment of the dues against such balances.

3) Necessary documents for imprest transactions taken place during the financial year 2023-24 are not made available for our verification. In the absence of adequate audit evidence, we are unable to ascertain any consequential effect of the above to the financial statements for the year.

4) Inventories amounting to Rs 1,450 Lakh (Net of "Payable to land owner for land under JDA") has not been tested impairment for ascertaining the realizable value as on 31st March, 2024. To the extent of any possible diminution of value not accounted for, the standalone financial statement may not give a true and fair view as per the requirement of Ind AS 2. (Refer to note no. 7 of standalone financial statements)

5) The Company has entered into One-time Settlements (OTS) with JCF ARC (assigned by YES Bank) and HDFC Limited as per which, the Company has to repay the amounts mentioned in the settlement letters in a time-bound manner. In the event the Company defaults on the mentioned timelines or any other payment terms, the said settlement approvals shall stand revoked.

On this basis, the Company has disclosed Rs. 8,507 Lakh under Current Borrowing (being the OTS outstanding balance of JCF ARC and HDFC) and Rs. 48,233 Lakh under Disputed Liability (being the difference between original loan and interest liability and OTS outstanding balance) as on 31st March, 2024.

However, the Company has defaulted on the timelines of the payment under OTS with respect to both the lenders. Subsequently, the Company has received a notice from JCF ARC revoking the above-mentioned OTS and called upon to repay outstanding dues along with applicable interest charges, costs, etc. with immediate effect. (Refer to note no. 13 (i) and (ii) and note no. 14(i) of the standalone financial statements)

As explained, the Company is in communication with the lenders for seeking an extension for the balance payment therefore has not booked any further liability on the basis of such demand from JCF ARC.

No information / document is made available for subsequent correspondence after the revocation in case of HDFC Limited.

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in 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 standalone financial statements under the provisions of the Companies Act, 2013 and the Rules made 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 Adverse opinion on the standalone financial statements.

Emphasis of Matter

We draw attention to the fact that:

a) During the year, the Company has divested its interest in its Wholly Owned Subsidiary - LOB Facilities Management Private Limited (LOB). Pursuant to the Companys object clause to carry out the business of all types of facility management services, including all kinds and types of security services, and on approval from shareholders, the Company has taken over two projects, maintenance charges of which were earlier billed by LOB, without any consideration. (Refer to note no. 6(v) and 20 of the standalone financial statements)

During the year, on account of divestment of subsidiary LOB, the employees of LOB has been taken over by the Company along with all pending balances in respect of these employees.

As of the reporting date, the balance receivable from LOB is Rs. 524 Lakh, which has been impaired due to the negative net worth of LOB.

b) The opening balance of advances given to one of its subsidiaries, Northroof Ventures Private Limited, amounted to Rs. 229 Lakh. Further, during the year, the Company has disbursed (net of realization) fresh advances amounting to Rs. 816 Lakh to

meet the working capital requirements. This amount has been fully impaired due to the negative net worth of this subsidiary. (Refer to note no. 10(ii) of the standalone financial statements)

c) During the previous financial year, the Company had impaired the entire amount of CWIP in the second quarter, by further provision of Rs. 8,835 Lakh towards the development cost of the projects namely Plaza, Soho and Chelsea on the basis of expected unrealizable amount from the landowner on final settlement of their dues on exit and cancellation of the JDA agreement or on handover to incoming developer. (Refer to note no. 4.2 (i) of the standalone financial statements)

Towards the end of the previous financial year, the Company transferred the Chelsea project to the landowner via a memorandum of settlement. Accordingly, the provision for impairment accounted for earlier in the books of account amounting to Rs. 3,177 Lakh with respect to the Chelsea project had been written back. (Refer to note no. 4.2 (ii) of the standalone financial statements)

However, the cancellation agreement and release of charge etc. with respect to Plaza and Soho are yet to be executed by the Company. Further, the necessary valuation reports in respect of these projects were not provided to us.

d) The Company has not renewed the registration of project "Rio" under the provisions of Real Estate (Regulation and Development) Act, 2016 since 31st March 2019, resulting in non-compliance under the relevant rules and regulations of the Real Estate (Regulation and Development) Act, 2016.

e) According to the information and explanation provided to us, Gratuity plan of the Company is unfunded as at 31st March, 2024 and the Company has made provision for the entire Gratuity Liability. Employee Gratuity Liability is being met as and when they fall due. As no assets are maintained by the Company, there is a liquidity risk that the Company may run out of cash resources which may further affect the financial position of the Company. (Refer to note no. 32 of standalone financial statements)

f) Certain Managerial personnel duly appointed by members have intimated the Board that they would be foregoing their remuneration from their respective date of appointment in order to comply with the provisions of section 197(1) of the Companies Act, 2013 since lenders approval prior to such appointment was not obtained. Accordingly, no managerial remuneration has been accounted for in the books of account in respect of those personnel. The board has noted the "Letter of Undertaking" received from the personnel for non-acceptance of salary and other remuneration.

g) The Company has written off/ written back several outstanding dues, including employee related liabilities of Rs. 46 Lakh, no longer required to be paid. As explained, such outstanding dues were lying in the books since long, which is ratified by the Board. (Refer to note no. 21 and 26 of the standalone financial statements)

h) Deferred tax has neither been ascertained nor accounted for due to the uncertainty of the taxable profit as estimated by the Management of the Company. (Refer to Note no. 16 of the standalone financial statements)

i) Security Deposit liability amounting to Rs. 17.50 Lakh against lease agreement is lying in the books. However, the Company has not discounted the same as per requirement of Ind AS 109 since the matter is sub-judice.

j) During the previous financial year, the Company had acquired JDA Rights in the Project at Commissariat Road in exchange for advance receivable along with its subsidiaries for an amount of Rs. 10,311 Lakh.

This Right has been classified as a Right of Use asset at the acquisition cost, and based on the management estimate, the carrying cost is below the net realizable value. The Company has yet to ascertain the period for necessary amortization. Refer to note no. 4.1 (i) and (ii) of the standalone financial statements)

Our opinion is not modified in respect of the above matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current year. 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. In addition

to the matters described in the Basis for Adverse Opinion section of our report, we have determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matter Response to Key Audit Matter
1. Accuracy of recognition, measurement, presentation and disclosures of revenues and other related balances in view of adoption of Ind-AS 115 "Revenue from contracts with Customers". Principal Audit Procedure:
The revenue recognition by the Company in a particular contract is dependent on certain key judgments relating to identification of distinct performance obligations, determination of transaction price of identified performance obligation and disclosures including presentations of balances in the standalone financial statements. (Refer note 20 to the standalone financial statements.) Our audit approach consisted testing of the design and operating effectiveness of internal controls and procedures as follows:
a) We have assessed the application of the provisions of the Ind AS 115 in respect of the Companys revenue recognition and appropriateness of the estimated adjustments in the process.
b) Selected a sample of existing continuing contracts and new contracts and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price.
c) Tested the relevant information, accounting systems and change relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard.
d) Performed analytical procedures and test of details for reasonableness and other related material items.
Our procedures did not reveal any major discrepancy

Information Other than the Financial Statements and Auditors Report thereon

The Companys Board of Directors is responsible for the preparation of the other information. The other information comprises the draft Directors Report including annexures to Directors Report and other reports included in the Annual report, but does not include the Standalone Financial Statements and our auditors report thereon.

Our opinion on the Standalone Financial Statements does not cover the other information and we do not and will 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 the other information is materially inconsistent with the Standalone Financial Statements, or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

When we read the full Annual report which is expected to be made available to us subsequently, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of the Management and Those Charged with Governance for the Standalone Financial Statements

The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("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, 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 judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the Companys ability to continue a s 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 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 standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial 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 system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the 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 au ditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matters

a) During the previous financial year, the Company entered into a Memorandum of Understanding (MOU) with the Landowner and another Developer "Sattva Real Estate Private Limited" to exit the project "British Columbia" on repayment of Rs. 600 Lakh to HDFC Bank and settlement of customer dues by the Landowner. Pursuant to this, HDFC Limited has released the charge on the said project and all customer refunds in relation to this project were made by the end of the year. Accordingly, the transfer of the project has been recorded in the Books of accounts as given below: (Refer to note no. 43 of the standalone financial statements)

Particulars Amount (Rs. In Lakh) Note No. Reference
Sales:
Repayment of Term Loan by Landowner 600 13 - Borrowings
Amount refunded to customers by the Landowner 384 16 - Other Current Liabilities
Revenue on sale of projects (A) 984 19 - Revenue from operations
Cost of Sales:
Assets transferred
Refundable deposit towards joint development agreement 450 10 - Other Assets
Advance against Property 195 10 - Other Assets
Properties under development 3,326 7 - Inventories
Net Cost of Sales (B) 3,971 21 - Land and construction cost
Net Loss (A) - (B) (2,987)

b) During the current financial year, the GST department has reinstated the GST registration vide form Reg 22 dated May 12, 2023. Pursuant to this, the Company has ascertained certain GST liabilities for previous years and deposited to the department.

However, the Company has received an order subsequently for cancellation of GST registration on account of failing to furnish the returns for prescribed periods.

On verification of documents and according to the explanation provided to us, the Company is raising GST invoices in order to deposit GST liability to the department as and when GST registration will stand valid.

c) As reported earlier, the Company in its earlier Annual General Meeting had declared its intention to enter into new areas of business. Accordingly, the Company had notified the SEBI on its revised main object for future businesses.

d) Necessary prior approval / omnibus approval from the Audit Committee as per requirement of Section 177 of the Companies Act, 2013 are not made available in case of advance against property amounting to Rs. 586 Lakh received from one related party viz. NIRPL Ventures Pvt Ltd. However, the same was subsequently ratified by the Audit Committee and Board.

Our report is not modified in respect of these 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 Companies Act, 2013, we give in the "Annexure - A", 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) Except for the effects of the matters described in the Basis for Adverse Opinion paragraph above read with the Emphasis of Matter and Other Matters paragraphs, we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) Except for the effects of the matters described in the Basis for Adverse Opinion paragraph above read with the Emphasis of Matter and Other Matters paragraphs, 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 statement of cash flows dealt with by this Report are in agreement with the books of account.

d) Except for the effects of the matters described in the Basis for Adverse Opinion paragraph above read with the Emphasis of Matter and Other Matter paragraphs, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with relevant rules issued thereunder.

e) The matters stated in the Basis for Adverse Opinion section above, in our opinion, may have an adverse effect on the functioning of the Company.

f) On the basis of written representations received from the directors as on 31st March, 2024 taken on record by the Board of Directors, none of the directors is disqualified from being appointed as director in terms of Section 164(2) of the Act as on 31st March, 2024.

g) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in Annexure -B. Our report expresses a qualified opinion on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting for the reasons stated therein.

h) In terms of the provisions of section 197(16) of the Companies Act, 2013 and according to the information, representation and explanation given to us by the management, no managerial remuneration has been paid/provided during the year apart from remuneration paid to one executive director in his operational capacity working as Chief Financial Officer of the Company.

i) With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Amendment Rules, 2021, as amended, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer note no. 34;

ii. According to the information and explanation given by the management, the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

iv. (a) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, 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, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, 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, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(c) Based on the audit procedures we have considered reasonable and appropriate in the circumstances; nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b) contain any material misstatement.

v. No dividend is declared or paid by the Company during the year and hence, compliance with section 123 of the Companies Act, 2013 is not applicable to the Company.

vi. Based on our examination which included test checks, the company has used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with.

As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable to the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 on preservation of audit trail as per the statutory requirement for record retention is not applicable for the financial year ended March 31, 2024.

ANNEXURE "A" TO THE INDEPENDENT AUDITORS REPORT

"Annexure A" referred to in our report to the members of Satchmo Holdings Limited (Formerly known as NEL Holdings South Limited) under the heading Report on Other Legal and Regulatory Requirements of our report at even date.

We report that:

i. (a) (A) The Company has maintained proper records showing the necessary particulars including quantitative details and situations of Property, Plant and Equipment. Further details on geographical location need to be incorporated.;

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

(b) According to the information and explanation given to us, the Company follows a policy of physical verification of the Property, Plant and Equipment in a phased manner over a period of three years. Some of the assets have been physically verified by the management during the year and no material discrepancies were noticed. In our opinion, the frequency of such verification is reasonable having regard to the size of the Company and the nature of its assets.

(c) Based on our examination of records and according to the information and explanation given to us, the Company has acquired a unit in an apartment complex during the year, as disclosed in note 4.1 of the standalone financial statements, and the title deed of such property is in the name of the Company.

During the previous year, the Company has obtained a Right to Use 87,500 sq. ft. of area at Commissariat Road Property through Deed of Settlement of various advances against which the agreement for use and terms and condition has yet to be entered into with the parties.

(d) The Company has not revalued any its Property, Plant and Equipment or any intangible assets during the year.

(e) According to the information, explanations and management representations provided to us, the Company is neither holding any Benami property nor any proceeding has been initiated or is pending against the Company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.

ii. (a) The Company is engaged in the business of real estate development and related services and holds inventories in the form of land, developed properties and properties under development. Having regard to the nature of inventory, the management has conducted physical verification of inventory by way of verification of Joint Development Agreements (JDA), site visits conducted and certification of extent of work completion by competent persons, at reasonable intervals during the year. However, in respect of certain projects, certificates of competent authority in respect of work completion has not been provided to us. Accordingly, we are unable to comment on whether material discrepancies, if any, have been properly dealt with in the books of accounts in such cases.

(b) According to the information and explanation given to us, the Company has not sanctioned working capital limits in excess of five crore rupees, in aggregate, from banks or financial institutions on the basis of security of current assets at any point of time during the year. Hence, filing of returns or statements to Banks or Financial Institution is not applicable to Company.

iii. According to the information and explanation given to us and on the basis of our examination of the records of the Company, the Company has not made investments in, 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 during the year. However, during the year, the Company has granted advances in the ordinary course of business to the following subsidiaries and other parties. In this respect, we report as below:

(a) The Company has provided unsecured advances in the ordinary course of business to its subsidiaries and other related parties.

(A) With respect to advances given to its subsidiaries, the following information was made available to us:

Name of Companies/ Parties Relation with the Company Amount provided during the year Outstanding Balance as on 31.03.2024
Northroof Ventures Private Limited (formerly known as NHDPL South Private Limited) Subsidiary 816 1,045

(B) With respect to advances given to related parties other than subsidiaries, the following information was made available to us:

Name of Companies/ Parties Relation with the Company Amount provided during the year Outstanding Balance as on 31.03.2024
Nitlogis Private Limited Other Party nil 380

(a) The Company has given fresh advance to a related party in addition to the existing receivables without the realization of earlier dues. The Company has not provided us the details with respect to such fresh advances/loans. Further, the Company has incurred cash losses during the year and is unable to pay its statutory liabilities. Due to such continued cash losses, such advances/ loans are prejudicial to the interest of the Company.

(b) We have not been provided the details stating the terms of advances/ loans granted. Hence, we cannot comment on the regularity of the receipts and repayments.

(c) Total amount of advances/ loans outstanding as per the financial statements is shown at Rs. 1,425 Lakhs. In the absence of necessary documents and information and explanation in the matter, we are unable to conclude whether the amount is overdue. We are not aware of the steps taken by the Company toward the recovery of these advances/ loans.

(d) In the absence of necessary information, we are unable to comment on whether the above amount outstanding has fallen due during the year. However, fresh advances/ loans were given to related parties amounting to Rs. 816 Lakhs which constitutes 57.26% of total outstanding dues.

(e) In the absence of necessary documents, advances/ loans given to related parties / Companies are without specifying any terms or period of repayment. The aggregate amount of advances/ loans granted to such related parties specified under sub-section (76) of section 2 of the Companies Act is Rs. 1,425 Lakhs which constitutes 100% of the total loans granted.

iv. According to the information and explanation given to us, the Company has granted fresh advances amounting to Rs. 816 Lakhs to certain wholly owned subsidiaries and other related parties other than subsidiaries during the current financial year in line with the provisions of sections 185 and 186 of the Act. However, in this respect, no further details could be obtained.

v. Based on our examination of records and according to the information and explanations given to us, the Company has not accepted any deposits or amounts which are deemed to be deposits within the meaning of sections 73 to 76 of the Companies Act and the relevant rules made thereunder. Hence, reporting under clause 3(v) of the Order is not applicable.

vi. To the best of our knowledge and according to the information and explanations given to us, the Central Government has prescribed for the maintenance of the cost records under section 148(1) of the Companies Act, 2013 in respect of the products of the Company. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 148 of the Act, and are of the opinion that prima facie, the necessary accounts and records have been made and maintained.

vii. (a) As per the records of the Company and according to the information and explanations provided to us, the Company

is irregular in depositing the undisputed statutory dues including Goods and Service Tax, provident fund, employees state insurance, income tax, sales tax, service tax, duty of custom, duty of excise, value-added tax, cess and other applicable statutory dues to the appropriate authorities.

The following amounts were outstanding as at 31st March 2024 for a period of more than six months from the date they became payable:

Name of the statute Nature of the dues Amount (Rs in Lakhs) Period to which the amount relates Due date Date of payment
Income Tax Act, 1961 TDS 58 April 2023 - September 2023 Various due dates Not paid
Income Tax Act, 1961 TDS 21 Previous Years Various due dates Not paid
CGST Act, SGST Act & IGST Act, 2017 GST 64 Previous years Various due dates Not paid
CGST Act, SGST Act & IGST Act, 2017 GST 17 April 2023- September 2023 Various due dates Not paid
Provident Fund & Misc. Provisions Act, 1952 Provident Fund 2 April 2023- September 2023 20th October 2023 Not paid
Provident Fund & Misc. Provisions Act, 1952 Provident Fund 41 Previous Years Various due Dates Not paid
Service Tax Act Service Tax 3 Previous Years Various due dates Not paid
KTPTCE Act, 1976 Profession Tax 0.47 Previous Years Various due dates Not paid

(b) According to the information and explanations given to us, the following are the disputed statutory dues which have not been deposited by the Company as on 31st March, 2024.

Name of Statute Nature of Dues Period to which

the amount relates

Amount

(Rs.

/Lakhs)

Forum where Dispute is Pending
KVAT Act VAT AY 2009-10 51 JCCT(A)
AY 2010-11 1267 HC
AY 2014-15 114 JMFC
AY 2016-17 140 JMFC
AY 2017-18 30 JMFC
GST Act, 2017 GST FY 2017-18 601 JCCT (A)
FY 2018-19 287 JCCT(A)
FY 2019-20 24 JCCT(A)

viii. According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not surrendered or disclosed any transactions not recorded in the books of accounts as income during the year in respect of tax assessments under the Income Tax Act, 1961 (43 of 1961).

ix. (a) According to the information and explanations given to us, the Company has defaulted in repayment of borrowings and

in the payment of interest thereon to the bank and financial institutions as mentioned below:

Nature of Borrowings, including debt securities Name of Lender Amount of default (Rs./Lakhs) Whether Principal or Interest (Rs./ Lakhs) Period of default
Term Loan J C Flower Asset Reconstruction Private Limited (previously with Yes Bank Limited) 24,881 Principal -19,710 and Interest - 5171 More than 180 days
Loan HDFC Limited 31,859 Principal - 18,312 and Interest - 13,547 More than 180 days

(b) According to the information, representation and explanation given to us and on the basis of examination of records made available to us, the Company has not been declared a wilful defaulter by the bank and the financial institution. However, as mentioned in note no.13(i) of the financial statements, these borrowings from the banks have become Non-Performing Assets (NPAs) as on the balance sheet date and the bank and the financial institution have called upon the debt.

(c) The Company has term loans as on the balance sheet date and as per representation of the management those term loans were applied for the purpose for which the loans were obtained by the Company. However, the necessary certification in respect of the end use of such loans or advance has not been provided to us by the management and hence we cannot comment on the same.

(d) According to the information and explanation provided to us, the Company has not raised any funds on short term basis during the year. Accordingly, clause ix (d) is not applicable.

(f) According to the information, representation and explanation provided to us, the Company has not taken any funds during the year from any entity or person on account of or to meet the obligations of its subsidiaries, associates or joint ventures.

(g) According to the information and explanation provided to us, the Company has not raised any loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate company.

x. (a) The Company has not raised money by way of initial public offer or further public offer (including debt instruments)

during the year. Hence, reporting under clause 3 (x) (a) of the Order is not applicable to the Company.

(b) The Company has not made any preferential allotment or private placement of shares or fully or partly paid convertible debentures during the year. Hence, reporting under clause 3 (x) (b) of the Order is not applicable to the Company.

xi. According to the information, representation and explanations given to us by the management,

(a) No fraud on or by the Company has been noticed or reported during the year. Accordingly, the provision of clause 3(x) of the said order is not applicable.

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

(c) The Company has not received any whistle-blower complaints during the year.

xii. The Company is not a Nidhi Company. Accordingly, paragraph 3(xii) of the Order is not applicable.

xiii. According to the information and explanations given to us by the management, all transactions with the related parties are in compliance with Sections 177 and 188 of the Companies Act, 2013 where applicable and the details have been disclosed in the standalone financial statements etc., as required by the applicable accounting standards. The management has provided us with extracts of the board meetings in respect of these transactions with related parties, however, the nature of such transactions and underlying documents in support of the same have not been provided to us.

xiv. According to the information and explanations given to us;

(a) The Company has an internal audit system commensurate with the size and nature of its business.

(b) The reports of the Internal Auditors for the period under audit were provided to us and was duly considered for our statutory audit purpose.

xv. According to the information and explanations given to us and as represented to us by the management, the Company has not entered into any non-cash transactions with directors or persons connected with them. Accordingly, the provision of clause 3(xv) of the Order is not applicable.

xvi. According to the information and explanations and representation given to us:

(a) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, reporting under clause 3(xvi)(a) of the Order is not applicable to the Company.

(b) The Company has not conducted any Non-Banking Financial or Housing Finance activities. Accordingly, reporting under clause 3(xvi)(b) of the Order is not applicable to the Company.

(c) The Company is not a Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India. Accordingly, reporting under clause 3(xvi)(c) of the Order is not applicable to the Company.

(d) The Group does not have any Core Investment Company. Accordingly, reporting under clause 3(xvi)(d) of the Order is not applicable to the Company.

xvii. The Company has incurred cash losses of Rs. 4,358 Lakhs in the financial year and Rs. 13,378 Lakhs in the immediately preceding financial year.

xviii. There has not been any resignation of the statutory auditors during the year. Hence the reporting under clause 3 (xviii) of the Order is not applicable to the Company.

xix. In our opinion and according to the information and explanations given to us and on the basis of the financial ratios, ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the financial statements, knowledge of the Board of Directors and management plans, we are of the opinion that material uncertainty exists as on the date of audit report that the Company may not be 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.

xx. According to the information and explanations given to us, the provisions of section 135 of the Companies Act is not applicable to the Company. Hence, reporting under clause 3(xx) of the Order is not applicable to the Company.

"Annexure-B" to the Independent Auditors Report

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

We have audited the internal financial controls over financial reporting of Satchmo Holdings Limited (formerly known as NEL Holdings South Limited and herein after referred as "the Company") as of 31st March, 2024 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

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

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. 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 over financial reporting 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 system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

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

Meaning of Internal Financial Controls over Financial Reporting

A companys internal financial control over financial reporting 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 over financial reporting 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 over Financial Reporting

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

Qualified Opinion

In our opinion, to the best of our information and according to the explanations given to us, except for the effects/possible effects of the material weaknesses described in Basis for Qualified Opinion paragraph below on the achievement of the objectives of the control criteria over financial reporting, there is an urgent requirement for the management to design control procedures for recording and documentation of transactions and financial approvals of the Company and also for complying with the various provisions of the applicable acts which as a whole are directly related to the effectiveness of the Internal Control Functions over Financial Reporting of the Company, considering the essential component of internal control as stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

Basis for Qualified Opinion

A material weakness is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, 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.

According to the information and explanations given to us and based on our audit procedures, the following material weaknesses have been identified in the Companys internal financial controls over financial reporting as at 31st March, 2024.

a) The Company did not have an appropriate internal control system relating to granting of unsecured advances for acquiring various immovable properties. The credit worthiness of the parties, exposure and experience in handling land procurement by third parties, asset base for providing security and guarantee, establishing segregation of duties, determining credentials of the counterparties and sufficient documentation regarding such transactions etc. should be verified at the time of authorization and disbursement of said advances.

b) The Company did not have complete system of obtaining year-end balance confirmation certificates in respect of trade receivables, trade payables, vendor advances, advance from customers and other advances.

c) The Company did not have an adequate internal control system to manage the utilization of loans and facilities obtained from the banks and other financial institutions as per the terms governing such loans and facilities and also the disclosure requirements against such loans and advances received from the banks and the financial institutions.

d) The Company did not have an appropriate internal control system to ascertain the realizable value of Inventory and also does not have a documented system of regular inventory verification.

e) The Company did not have adequate internal control for ascertaining tax assets/liabilities and payments of statutory dues including Income Tax and Goods and Service Tax and other relevant Taxes.

f) The Company did not have an appropriate internal control system to ascertain the net realizable value of financial assets and the system for conducting impairment testing to ascertain the actual value of the asset to be carried in the books of accounts.

g) The Company did not have an appropriate internal control system to ascertain and maintain employee-wise ageing details of the salary payable and other employee benefit expenses like gratuity payable.

h) The Company should introduce an appropriate internal controls system to ascertain the customer wise balance for billing in excess of revenue, unbilled revenue.

We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2024 standalone financial statement of the Company, and these material weaknesses have affected our opinion on the standalone financial statement of the Company and we have issued an adverse opinion on the standalone financial statement.