To the Members of Phantom Digital Effects Limited.,
Report on the Audit of the Standalone Financial Statements
Opinion
1. We have audited the accompanying Standalone financial statements of Phantom Digital Effects Limited (the "Company"), which comprise the Standalone Balance Sheet as at 31st March, 2025, the Standalone Statement of Profit and Loss, the Standalone Statement of cashflows for the year then ended, and notes to the Standalone financial statements, including a summary of the significant accounting policies and other explanatory information. (Hereinafter referred to as the "Standalone Financial statements").
2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements for the period ended 31st March, 2025 give the information required by the Companies Act, 2013 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the standalone state of affairs of the Company as at 31st March, 2025, and standalone profit, and its standalone cash flows for the year ended on that date.
Basis for Opinion
3. 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 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 standalone financial statements under the provisions of the Companies Act, 2013 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 opinion on the Standalone Financial Statements.
Key Audit Matters
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter |
How the matter was addressed in our audit |
The Company derives its revenues primarily from Sale of Visual effects (VFX) Service contracts. The revenue from VFX Service contracts are recognised on proportionate completion basis. Sales are shown net of sales returns, if any. | In view of the significance of the matter we applied the following audit procedures in this area, among others to obtain sufficient audit evidence: |
We identified the revenue recognition for Visual effects (VFX) Service contracts where proportionate completion basis method is used as a key audit matter because of the significant judgement involved in estimating the efforts to complete such contracts. | 1. Assessed the appropriateness of the revenue recognition, accounting policies, with the applicable accounting standards. |
This estimate has a high inherent uncertainty and requires consideration of progress of the contract, efforts incurred to date and estimates of efforts required to complete the remaining performance obligations. | 2. We have verified the contract with customers made in this regard and revenues accounted under proportionate Completion method. |
3. The progress of each projects are separately treated in terms of human resources and other resources and the billing is made as per the stages of completion. | |
4. The unbilled revenue is recognised once the milestone is reached and tax invoice is accounted in the books after obtaining approval from the concerned customer in the subsequent financial year. |
Emphasis of Matter
A payment of Rs. 1427.66 lakhs made to one of the parties, which, as per the Agreement, pertains to 3D and VFX services; however, this amount has not been given effect in Profit & Loss Account and pending revenue recognition by the Company.
Other Matters
The foreign currency denominated monetary items appearing in the financial statements as on the balance sheet date have not been restated in accordance with Accounting Standard (AS) 11 The Effects of Changes in Foreign Exchange Rates.
Information Other than the Financial Statements and Auditors Report Thereon
5. The Companys Board of Directors is responsible for the preparation of the other information. The other information comprises the Management Discussion and Analysis, Companys Board Report including Annexures and Corporate Governance Report, but does not include the standalone financial statements and our auditors report thereon. The annual report is expected to be made available to us after the date of this auditors report
6. Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
7. In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
Responsibilities of the Management and Those charged with Governance for the Financial Statements:
8. 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 standalone financial position, standalone financial performance and standalone cash flows 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 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.
9. 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.
10. The Board of Directors are also responsible for overseeing the Companys financial reporting process.
Auditors Responsibilities for the Audit of the Financial Statements:
11. 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.
12. As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
i. 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.
ii. 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 Companies Act, 2013, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.
iii. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
iv. 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.
v. 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. 13. 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.
14. 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.
15. 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.
16. 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.
Report on Other Legal and Regulatory Requirements:
As required by the Companies (Auditors Report) Order, 2020 ("the Order"), issued by the Central Government of India in terms of sub section (11) of section 143 of the Companies Act, 2013, we give in "Annexure - A" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
18. As required by Section 143(3) of the Act, we report that:
i. 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.
ii. 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.
iii. The Standalone Balance Sheet, the Standalone Statement of Profit and Loss, and the Standalone Statement of Cash Flow dealt with by this Report are in agreement with the books of account.
iv. In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act read with the Rule 7 of Companies (Accounts) Rules, 2014, as amended.
v. On the basis of written representation received from the directors as on 31st March 2025 taken on record by the board of directors, none of the directors are disqualified as on 31st March 2025 from being appointed as directors in terms of section 164(2) of the Act.
vi. 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 control over financial reporting.
vii. With respect to the other matters to be included in the Auditors Report in accordance with the requirements of section 197(16) of the Act, as amended: In our opinion and 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.
viii. With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:
a) The Company has no pending litigations as at 31st March 2025 which would impact its Standalone Financial Position.
b) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses during the year ended 31st March 2025.
c) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31st March 2025.
ix. (a) The Management has represented that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entity ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(b) The Management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(c) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
x. The Company did not declare or paid any dividend during the period. xi. Based on our examination, which included test checks, the Company has used accounting software for maintaining its books of account for the financial year ended 31st March, 2025, 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 and the audit trail feature has not been tampered with and the audit trail has been preserved by the company as per the statutory requirements for record retention.
For L U Krishnan & Co. | P K Manoj |
Chartered Accountants | Partner |
Firms Registration No: 001527S | Membership No:207550 |
Place: Chennai | UDIN: 25207550BMJDIK4485 |
Date: 30/05/2025 |
ANNEXURE - A
TO THE INDEPENDENT AUDITORS REPORT ON THE STANDALONE FINANCIAL STATEMENTS OF PHANTOM DIGITAL EFFECTS LIMITED FOR THE YEAR ENDED 31st MARCH 2025
(Referred to in paragraph 18 under Report on Other Legal and Regulatory Requirements section of our report)
The Annexure referred to in Independent Auditors Report to the members of the Company on the Standalone financial statements (Hereinafter referred to as the "Standalone Financial statements") for the period ended 31st March, 2025 we report that:
i. In respect of the Companys Property, Plant and Equipment and Intangible Assets:
a. A. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
B. The Company has maintained proper records showing full particulars of Intangible Assets
b. The Company has a regular program of physical verification of its Property, Plant and Equipment by which its Property, Plant and Equipment are verified at reasonable intervals. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its Property, Plant and Equipment. According to the information and explanations given to us, no material discrepancies were noticed on such verification of Property, Plant and Equipment
c. According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company do not have Immovable Property.
d. The Company has not revalued any of its Property, Plant and Equipment during the financial year.
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 pending against the Company for holding any benami property under the Prohibition of Benami Property Transactions Act, 1988 and rules made thereunder.
ii. a. The activities of the Company do not involve purchase of inventory and sale of goods during the period and accordingly Clause (ii) of the paragraph 3 of the Order is not applicable to the Company for the period.
b. The Company has been sanctioned working capital limit in excess of Rs. 5 Crores, in aggregate, from banks or financial institutions on the basis of security of current assets. The monthly returns or statements filed by the Company with such banks or financial institutions are generally in agreement with the books of account of the Company and no material discrepancies observed.
iii. In respect of Investment 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:
a. During the year the Company has not provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured to any company, firm, LLP, or other parties during the period, and hence reporting under clause 3(iii)(a) of the Order is not applicable.
b. During the year, the Company has not made investments, provided guarantees, given security and the terms and conditions of the grant of all loans and advances in the nature of loans and guarantees provided are not prejudicial to the Companys interest, hence reporting under clause 3(iii)(b) of the Order is not applicable.
c. During the year the Company has not provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured to any company, firm, LLP, or other parties during the period, and hence reporting under clause 3(iii)(c) to (f) of the Order is not applicable.
iv. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Companies Act, 2013 in respect of loans granted, investments made and guarantees and securities provided, as applicable.
v. According to the information and explanations given to us, the Company has not accepted deposits and does not have any unclaimed deposits within the meaning of Section 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of the clause 3 (v) of the Order are not applicable.
ANNEXURE - A
TO THE INDEPENDENT AUDITORS REPORT ON THE STANDALONE FINANCIAL STATEMENTS OF PHANTOM DIGITAL EFFECTS LIMITED FOR THE YEAR ENDED 31st MARCH 2025
vi. Company does not come under the maintenance of cost records as prescribed by the Central Government under section 148(1) of the Act. Hence reporting clause (vi) of the order is not applicable to Company.
vii. In respect of statutory dues:
a. In our opinion, and according to the information and explanations given to us, undisputed statutory dues including goods and services tax, provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, have not been regularly deposited with the appropriate authorities. Undisputed amounts payable of Rs. 4,69,000 in respect thereof, which were outstanding at the 31st March 2025 for a period of more than six months from the date they became payable are as follows:
Statement of arrears of statutory dues outstanding for more than six months:
Nature of Statute |
Section | Amount | Due Date for Making Payment |
Income Tax Act, 1961 | 194 J | 60,000 | 07-05-2024 |
Income Tax Act, 1961 | 194 J | 1,00,000 | 07-05-2024 |
Income Tax Act, 1961 | 194 C | 50,000 | 07-05-2024 |
Income Tax Act, 1961 | 194 C | 25,000 | 07-05-2024 |
Income Tax Act, 1961 | 194 C | 40,000 | 07-07-2024 |
Income Tax Act, 1961 | 194 C | 38,000 | 07-07-2024 |
Income Tax Act, 1961 | 194 C | 78,000 | 07-08-2024 |
Income Tax Act, 1961 | 194 C | 78,000 | 07-09-2024 |
b. According to the information and explanations given to us, there were no dues in respect of income tax, sales tax, service tax, value added tax, goods and service tax, duty of custom, duty of excise, cess and other statutory dues which have not been deposited on account of any dispute.
viii. According to the information and explanation given to us and on the basis of our examination of the records, there were no transactions relating to previously unrecorded income that have been surrendered or disclosed as income during the period in the tax assessments under the Income Tax Act, 1961. Accordingly, paragraph 3 (viii) of the Order is not applicable.
ix. In respect of loans and other borrowings:
a. The Company has not defaulted in repayments of loans or other borrowings or in the payment of interest thereon from any lender. Hence reporting under clause 3(ix)(a) of the Order is not applicable.
b. The Company has not been declared a wilful defaulter by any bank or financial institution or any other lender.
c. The Company has taken term loan and the same were applied for the purpose for which the loan were obtained.
d. On examination of the standalone financial statements of the Company, Company has not raised any funds on short term basis which has been used for long-term purposes hence reporting under clause 3(ix)(d) of the Order is not applicable.
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 subsidiaries, associates or joint ventures and hence reporting on clause 3(ix)(e) of the Order is not applicable.
f. The Company has not raised any loans on the pledge of securities held in its subsidiaries, associate companies during the period and hence reporting on clause 3(ix)(f) of the Order is not applicable.
x. In respect of public offer:
A. The Company has passed special resolution to issue Equity shares (Face value Rs. 10) through a Qualified Institutional Placement for an amount aggregating up to Rs. 80.00 crores on 26th March 2025.
B. During the year, the Company has passed a special resolution for preferential allotment of 24,27,000 Convertible Warrants of Rs. 10 each at a premium of Rs. 237 each (Rs. 59,94,69,000) in compliance with sections 42 and 62 of the Companies Act, 2013 on 26th March, 2025. The Company made allotment of 4,00,000 shares of Rs. 9,88,00,000 out of issue of shares (being the total amount) and Rs. 2,47,00,000 out of issue of Share warrant (being 25% of total amount) on 30th April, 2025.
xi. In respect of fraud:
a. According to the information and explanations given to us, during the period Company has not noticed any fraud by the Company or on the Company.
b. No reportable fraud has been committed by the Company hence Form ADT-4 has not been filed by the auditors as prescribed under rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government.
c. During the period Company has not received any whistle-blower complaints to be considered by the auditors.
xii. 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, all transactions entered by the Company with the related parties are in compliance with Section 177 and 188 of the Act where applicable and details of such transactions have been properly disclosed in the notes to the financial statements as required by the applicable accounting standards.
xiv. In respect of Internal Audit system:
a. In our opinion and based on our examination, the Company has an internal audit system commensurate with the size and the nature of its business.
b. We have considered, the internal audit reports of the company issued till date, for the period under audit.
xv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, Clause 3(xv) of the Order for reporting the provisions of section 192 of the Companies Act is not applicable.
xvi. Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934. Accordingly, paragraph 3(xvi) (a), & (b) of the Order is not applicable and Company is not a Core Investment Company and there is no core investment company within the group. Accordingly, paragraph 3(xvi) (c) & (d) of the Order is not applicable.
xvii. The Company has not incurred any cash loss during the financial period covered by our audit and immediately preceding financial period.
xviii. There has been no resignation of the statutory auditors of the Company during the year.
xix. On the basis of the standalone financial ratios, ageing and expected dates of realisation of standalone financial assets and payment of standalone financial liabilities, other information accompanying the standalone financial statements and our knowledge of the Board of Directors and Management plans and based on our examination of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on the date of the audit report indicating that Company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date. We, however, state that this is not an assurance as to the future viability of the Company. We further state that our reporting is based on the facts up to the date of the audit report and we neither give any guarantee nor any assurance that all liabilities falling due within a period of one period 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, the Company is expected to transfer unspent amount Rs. 40.68 lakhs to a Fund specified in Schedule VII to the Companies Act within a period of six months of the expiry of the financial year in compliance with second proviso to subsection (5) of section 135 of the said Act; B. The amendments to section 135 of the Act, by inclusion of sub-section (6), through the introduction of the Companies (Amendment) Act, 2019 is yet to be notified and as such provisions of this clause are not yet applicable to the company.
xxi. The reporting under clause 3(xxi) of the Order is not applicable in respect of audit of standalone financial statements of the Company. Accordingly, no comment has been included in respect of said clause under this report.
For L U Krishnan & Co. | P K Manoj |
Chartered Accountants | Partner |
Firms Registration No: 001527S | Membership No:207550 |
Place: Chennai | UDIN: 25207550BMJDIK4485 |
Date: 30/05/2025 |
ANNEXURE - B
TO THE INDEPENDENT AUDITORS REPORT ON THE STANDALONE FINANCIAL STATEMENTS OF PHANTOM DIGITAL EFFECTS LIMITED FOR THE YEAR ENDED 31st MARCH 2025
(Referred to in paragraph 19(VI) under Report on Other Legal and Regulatory Requirements section of our 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 Phantom Digital Effects Limited (the "Company") as of 31st March, 2025 in conjunction with our audit of the Standalone financial statements (Hereinafter referred to as 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. 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") issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, 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 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 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 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 standalone 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 standalone financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and
(3) Provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the companys assets that could have a material effect on the standalone financial statements.
Inherent Limitations of Internal Financial Controls 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
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, 2025: a) The Company did not have an appropriate internal control system for customer or vendor acceptance, credit evaluation and establishing customer credit limits for sales or vendor selection for purchases, which could potentially result in the Company recognizing revenue or capital expenditure without establishing reasonable certainty of ultimate collection or timely completion of Capital projects. 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 financial statements will not be prevented or detected on a timely basis.
In our opinion, except for the possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as of March 31, 2025, 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. 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, 2025 standalone financial statements of the Company, and these material weaknesses do not affect our opinion on the standalone financial statements of the Company
For L U Krishnan & Co. | P K Manoj |
Chartered Accountants | Partner |
Firms Registration No: 001527S | Membership No:207550 |
Place: Chennai | UDIN: 25207550BMJDIK4485 |
Date: 30/05/2025 |
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