We have audited the accompanying Standalone Ind AS Financial Statements of RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2024, the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity and Statement of Cash Flows for the year ended March 31, 2024 and notes to the financial statements, including a summary of material accounting policies and other explanatory information (hereinafter referred to as "the Standalone Ind AS Financial Statements").
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Ind AS Financial Statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with 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 and total Comprehensive Income, changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the Standalone Ind AS Financial Statements in accordance with the Standards on Auditing specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the independence requirements that are relevant to our audit of the Standalone Ind AS Financial Statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Ind AS Financial Statements.
Emphasis of Matter
We draw attention to the following matters:
a) Note No. 46 - Property, Plant and Equipment: Title
deeds of Immovable properties:
In respect of immovable properties other than
land, i.e. building and other structures situated at its Trombay and Thal units, the Company has self-constructed properties on the land owned by the Company as evidenced by property cards/title deeds of land.
The Company has contested that major portion of the immovable assets became vested with the Company as a result of Government of India reorganizing certain fertilizers companies in the past. Based on the legal opinion obtained, the company is of the view that it has clear title to the same and also initiated the process of obtaining evidence of title towards self-constructed properties.
Apart from such properties, immovable properties, including land for which title deeds are not in the name of the Company is mentioned in the standalone Ind AS financial statements.
b) Note No. 48 - Gas pooling applicable to Fertilizer (Urea) sector:
The Company has recognized a receivable of Rs.0.73 crores for the Year ended March 2024 and Rs. 80.57 crore cumulatively till March 2024 from Department of Fertilizers on account of pooled price differential raised by GAIL India Limited on account of substitution of EPMC and Spot gas used for Urea operations with cheaper market priced gas.
c) Note No. 50 - Subsidy of Sulphur Coated Urea
The Company has undertaken production of Sulphur Coated Urea of 3791.72 MT for commercial purpose. Government of India has notified the Maximum Retail Price (MRP) which is on similar lines as that of Neem Coated Urea, however as the subsidy rates are yet to be notified, Company has estimated the subsidy income amounting to Rs. 10.81 crore based on the proportionate Nitrogen content of notified subsidy rates of Neem Coated Urea. The Company has approached DOF for notifying the subsidy of Sulphur Coated Urea.
d) Note No. 51 - Revised NBS Subsidy rates by Government:
Government of India announced reduction in rates of Nutrient Based Subsidy (NBS) which has adversely impacted profitability of imported NPK Fertilizers, to ensure availability of Phosphatic and Potassic (P&K) fertilizers in Rabi 2023-24 and undertake such procurement on priority. The price adversity if any beyond applicable NBS rates will be addressed by DOF to protect at no profit no loss basis.
Accordingly, the Company has undertaken import of DAP and NPK Fertilizers during the period October to March 2024 and has recognized compensation towards such differential which is over and above the notified NBS rates based on its estimates amounting
to Rs. 207.23 crore for the period, in line with DOF's assurance.
e) Note No. 66 - Exceptional Item:
The Company has sold 16,530 sq meters of Transferable Development Rights (TDR) during the quarter ended 30th June,2023 and realized a gain of Rs 25.28 Crores.
The Company has done fair valuation of TDR and recognized a gain of Rs. 15.04 crores as at 31st March, 2024.
These items has been reported as an exceptional item.
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 Ind AS financial statements of the current period. These matters were addressed in the context of our audit of the Standalone Ind AS Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The key audit matters identified in our audit are:
1. Revenue Recognition and measurement in respect of subsidy income.
2. Estimation of Provision & Contingent Liabilities.
3. Information Technology General Control.
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Sr.
No.
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Key Audit matter
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Response to Key Audit Matter
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1.
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Revenue recognition and measurement in respect to subsidy income.
Recognition of subsidy is generally made on the basis
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Our Procedure included: Accounting policies and principles:
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of in principle recognition/approval /settlement of
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We have reviewed the Companys accounting policies
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claims from Government of India/Fertilizer Industry Co-
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for Subsidy on Urea as mentioned under "Note A.
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ordination Committee while finalizing the standalone
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Statement of Material Accounting policies (MI) B)
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Ind AS financial statements.
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Revenue Recognition" of the standalone Ind AS financial statements and the same is compared with
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During the year, Subsidy adjusted on account of the escalations/de-escalations basis for the year amounts
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the applicable Ind AS.
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to Rs. 409.39 Crore refundable to FICC/DOF (PY Rs. 114.53 Crore refundable).
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Tests of controls:
We have evaluated the design, implementation
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Such adjustments have been done for escalations/de-
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and operating effectiveness of key controls over
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escalations in the cost of inputs and other costs, as
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recognition of subsidy income.
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estimated by the management based on the prescribed
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Tests of details:
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norms in line with known policy parameters.
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MRP of Urea being fixed by Government of India,
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We have verified the supporting documentation for
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the Company is entitled for subsidy wherein certain
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determining that the subsidy was recognized in the
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inputs costs are a pass through and compensation
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correct accounting period and as per notified rates.
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for production beyond a level of production known as
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In absence of notified rates, we have verified
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Reassessed capacity is restricted to lower of Import
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calculation of estimated rates based on information
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Parity Price (IPP) of Urea plus other incidental charges
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available with the Company for such costs which are
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which the government incurs on imported Urea, or its own concession price, as determined under extant
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a pass through.
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policies for Urea. Further subsidy income is net of
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In case estimation of income is based on other
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adjustments of recoveries towards sale/transfer for
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parameters like IPP of Urea etc. The verification of the
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surplus ammonia or non-conversion of entire ammonia
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same is based on available information, judgments the
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into Urea.
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management made in relation to the notifications/ policies ,subsequent evidence etc. as applicable.
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Since there is a time lag between actual expenditure
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Testing reasonability of assumptions based on past
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incurred and notification of concession rates for the
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trends, consistency in application and changes in the
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year, Management exercises significant judgement in arriving at the income entitlement on account of same for the year.
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same owing to change in Government policies.
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Sr.
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Key Audit matter
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Response to Key Audit Matter
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Therefore, there is a risk of revenue being misstated on account of errors in estimation of concession/IPP rates yet to be notified, due to absence of notification available and change in methodology/ calculation, if any for arriving at price concession.
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Performing substantive analytical procedures: -
Ascertainment and analysis of variations with respect of amounts estimated and actually entitled upon notification with respect to previous years.
We also assessed as to whether the disclosures in respect of revenue were adequate.
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2
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Estimation of Provision & Contingent Liabilities
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Internal enquiry:
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In the recognition and measurement of provisions, there is uncertainty about the timing or amount of the future expenditure required to settle the liability.
In respect of contingent liabilities, there are estimates and assumptions made to determine the amount to be disclosed.
As at the year ended 31 March 2024, the amounts involved are significant. There is a high degree of judgement required for the recognition and measurement of provisions and disclosure of contingent liabilities.
There is a risk of material misstatement that the estimates are incorrect and that the provisions or contingent liabilities are materially misstated.
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We enquired of the senior management and inspected the minutes of the board and various committees of the board where relevant, for claims arising and challenged whether provisions are required.
Tests of details:
In respect of significant claims, we checked the amount of claim, nature of issues involved, management submissions and corroborated the same with external evidence, where available.
Enquiry and confirmation of lawyers:
In respect of matters which are under dispute, we have assessed opinion of the Company's in-house Legal Department / external lawyers wherever necessary.
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3
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Information Technology Controls
A significant part of the Company's financial reporting process is heavily reliant on IT systems with automated processes and controls over the capture, storage and extraction of information. A fundamental component of these processes and controls is ensuring appropriate user access and change management protocols exist and being adhered to. These protocols are important because they ensure that access and changes to IT systems and related data are made and authorised in an appropriate manner. As our audit sought to place a high level of reliance on IT systems and application controls related to financial reporting, high proportion of the overall audit effort was in Information Technology (IT) Systems and Controls. We focused our audit on those IT systems and controls that are significant to the Company's financial reporting process.
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We focused our audit on those IT systems and controls that are significant to the Company's financial reporting process.
We assessed the design and tested the operating effectiveness of the Company's IT controls including those over user access and change management as well as data reliability.
In a limited number of cases, we adjusted our planned audit approach as follows:
- We extended our testing to identify whether there had been unauthorized or inappropriate access or changes made to critical IT systems and related data;
- Where automated procedures were supported by systems with identified deficiencies, we extended our procedures to identify and test alternative controls; and
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- Where required, we performed a greater level of testing to validate the integrity and reliability of associated data and reporting.
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Further, We have relied on provisional observations of independent consultant's past reports and the Company's replies to the observations raised by the consultants.
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Other Information
The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Annual report but does not include the standalone Ind AS financial statements and our auditor's report thereon. The Company's Annual report is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone Ind AS financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS 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 Ind AS financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated.
When we read the Company's annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
Management and Board of Directors' Responsibilities for the Standalone Ind AS Financial Statements
The Company's 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 Ind AS Financial Statements that give a true and fair view of the financial position, the financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed 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 the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Ind AS 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 Ind AS Financial Statements, management is responsible for assessing the Company's 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.
The Board of Directors is also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the Standalone Ind AS Financial Statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditor's 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 Ind AS Financial Statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the Standalone Ind AS 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 controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to the standalone Ind AS financial statements in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's 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 Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the Standalone
Ind AS 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 auditor's 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 Ind AS Financial Statements, including the disclosures and whether the Standalone Ind AS Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the Standalone Ind AS Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone Ind AS 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 Ind AS 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 Ind AS Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's 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 Matter
a) The Standalone financial Results of the Corporation for the year ended March 31, 2023 were audited by M M Nissim & Co. LLP and Gokhale & Sathe (Joint Auditors) whose report dated May 30, 2023, expressed an unmodified opinion on those standalone financial results.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2020 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143 (5) of the Act, we give in "Annexure B" the directions and sub-directions issued by the Comptroller and Auditors General of India (CAG), the action taken thereon and its impact on the accounts and the standalone Ind AS financial statements of the Company.
3. Non - Compliance of the SEBI Listing Obligation and Disclosure Requirements (LODR) Regulations, 2015 - as per Regulation 17(1)(b), the Chairman being an Executive Director, at least half of the Board of Directors should be comprised of Independent Directors including one Women Independent Director. Currently, the Company does not have required number of Independent Directors on its board. (Refer Note 42.1.3 to the standalone Ind AS Financial Statements)
4. (A) As required by section 143(3) of the Act, we report that:
a) 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) 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 Standalone Balance sheet, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flow dealt with by this report are in agreement with the relevant books of account.
d) In our opinion, the aforesaid Standalone Ind AS Financial Statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act.
e) The Company being a government company, the provision of section 164(2) is not applicable in accordance with the Notification No. GSR 463 (E) dated June 5, 2015 issued by Ministry of Corporate Affairs. Accordingly, no reporting regarding Clause 3(g) of section 143 is required.
f) With respect to the adequacy of the internal financial controls with reference to the standalone Ind AS financial statements of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure C".
(B) 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:
i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Ind AS Financial Statements - Refer Note 42 to the Standalone Ind AS financial statements;
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;
iii. There is no delay in transferring amounts, 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, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall:
• directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Company or
• provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
b) The management has represented, that, to the best of its knowledge and belief, no funds have been received by the Company from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall:
• directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Funding Party or
• provide any guarantee, security or the like from or on behalf of the Ultimate Beneficiaries; and
c) Based on such audit procedures as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under clause (iv) (a) and (iv) (b) contain any material mis-statement.
v. The dividend declared or paid during the year by the Company is in compliance with section 123 of the Act.
(C) With respect to the other matters to be included in the Auditor's Report as per section 197 (16) of the Act:
In accordance with requirements of section 197 (16) of the act as amended: As per notification number G.S.R. 463 (E) dated June 5, 2015 issued by Ministry of Corporate Affairs, Section 197 of the Act as regards the managerial remuneration is not applicable to the Company, since it is a Government Company.
(D) Based on our examination which included test checks, the Company has used an SAP HANA 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 audit we did not come across any instance of audit trail feature being tampered with. [Additionally, the audit trail has been preserved by the Company as per the statutory requirements for record retention.]
For K. Gopal Rao & Co For Parakh & Co.
Chartered Accountants Chartered Accountants
FRN : 000956S FRN : 001475C
Gopal Krishna Raju Shalabh Jain
Partner Partner
M. No.: 205929 M. No.: 441015
UDIN: 24205929BKGVLH7548 UDIN: 24441015BKCZYF5767
Place: Mumbai Date: 17th May, 2024
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