To the Members of SITI Networks Limited
Report on the Audit of the Standalone Financial StatementsDisclaimer of Opinion
1. We were engaged to audit the accompanying standalone financial statements of SITI Networks Limited (‘the Company’), which comprise the Balance Sheet as at 31 March 2024, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including a summary of the significant accounting policies and other explanatory information.
2. We do not express an opinion on the standalone financial statements of the Company. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report below, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone financial statements.
Basis for Disclaimer of Opinion
3. As described in note 52 to the standalone financial statements, the Hon’ble National Company Law Tribunal (‘NCLT’), Mumbai Bench admitted petition for initiation of Corporate Insolvency Resolution Process (‘CIRP’) under Section 7 of the Insolvency and Bankruptcy Code 2016 filed by the Financial Creditor vide order dated 22 February 2023, passed in CP no. 690/IBC/MB/2022 (‘Admission Order’). The Admission Order was challenged by one of the Directors (powers suspended) of the Company before National Company Law Appellate Tribunal (NCLAT). NCLAT vide order dated 07 March 2023 stayed the operation of the Admission Order dated 22 February 2023. The appeal filed was subsequently dismissed by the National Company Law Appellate Tribunal on 10 August 2023 (NCLAT Final Order). Pursuant to the NCLAT Final Order, the Resolution Professional (RP) has taken over management and control of the company on 16 August 2023. The Board of Directors (powers suspended) were responsible for management and control of the Company till the date of the NCLAT Final Order. A moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 is in force with respect to the affairs of the Company. However, the matter relating to the treatment of liabilities, obligations, and claims incurred for the stay period i.e., 07 March 2023 upto 10 August 2023 and cut-off date for certain activities, is currently sub-judice with NCLT, Mumbai. In absence of sufficient and appropriate audit evidence, we are unable to comment on the impact of the outcome of the CIRP on the standalone financial statements of the Company.
4. As described in note 65 to the standalone financial statements, the Company has defaulted in repayment of loans from banks and financial institutions and these accounts have been classified as Non-Performing Assets (NPA) by the lenders under the Consortium. The Company has not provided additional and penal interest as part of finance cost in terms with conditions put forth in arrangements entered into between the banks and financial institutions with the Company. In absence of the computation of such interest along with other sufficient appropriate audit evidence, we are unable to comment upon the impact of such non-compliance on the standalone financial statements for the year ended 31 March 2024.
5. As described in note 56 to the standalone financial statements, we have been informed that the financial creditors have submitted claims amounting to ^ 12,060.33 million as on 10 August 2023, out of which ^ 11,292.65 million have been admitted by the RP. The corresponding balance of such borrowings as on 31 March 2024 is ^ 10,759.68 million in the books of accounts. In absence of sufficient and appropriate audit evidence for reconciliation of the balances as per the claims submitted, claims admitted and the outstanding balances in the books of accounts, we are unable to comment upon the impact of such non-accrual of additional/ penal interest along with other sufficient appropriate audit evidence with respect to recognition of liabilities, their measurement and all related disclosures to be made, on the standalone financial statements for the year ended 31 March 2024.
6. As described in note 56 to the standalone financial statements, we have been informed that the operational creditors, employees, statutory authorities and other creditors have submitted claims amounting to ^ 19,834.60 million as on 10 August 2023, out of which ^ 7,066.86 million have been admitted and ^ 3,391.56 million has been admitted as contingent claim by the RP. In absence of sufficient and appropriate audit evidence supporting the admission amount of claims and in the absence of reconciliation of the balances as per the claims submitted, claims admitted and the outstanding balances in the books of accounts, we are unable to comment upon the impact of such non-accrual of additional liability, if any, along with other sufficient appropriate audit evidence with respect to recognition of liabilities, their measurement and all related disclosures to be made, on the standalone financial statements for the year ended 31 March 2024.
7. As described in note 57 to the standalone financial statements, we have not been provided with information pertaining to the proceedings of CIRP process including the minutes of meetings of the Committee of Creditors (CoC), and the outcome of procedures carried out as a part of the CIRP, citing confidentiality reasons. Accordingly, we are unable to comment on the impact, if any, on the standalone financial statements for the year ended 31 March 2024 including recognition, measurement and disclosures, that may arise had we been provided access to above-mentioned information.
8. As described in note 58 and note 59 to the standalone financial statements, two subsidiary companies of Siti Networks Limited, namely, Siti Broadband Services Private Limited and Siti Jind Digital Media Communications Private Limited have been admitted into the CIRP process by orders dated 31 October 2023 and 24 March 2024 of NCLT, Delhi respectively. Their financial statements have not been audited by their statutory auditors and have not been approved/signed by the Resolution Professional appointed for these subsidiaries for the year ended 31 March 2024. In the absence of such financial statements being duly audited by the statutory auditors of these companies, together with other aforementioned matters, we are unable to obtain sufficient appropriate audit evidence to confirm the transactions with and the balances outstanding from/to such subsidiary companies in the books of Company along with the impairment in carrying value of investments, if any, as at and for the year ended 31 March 2024.
9. We have not been provided with the audited financial statements of subsidiary companies namely, Siti Broadband Services Private Limited, Siti Jind Digital Media Communications Private Limited, Siti Jai Maa Durgee Communications Private Limited, Siti Sagar Digital Cable Network Private Limited, Siti Vision Digital Media Private Limited. In the absence of such financial statements being duly audited by the statutory auditors of these companies, we are unable to obtain sufficient appropriate audit evidence to confirm the transactions with and
the balances outstanding from/to such subsidiary companies in the books of the Company along with the impairment in carrying value of investments, if any, as at and for the year ended 31 March 2024.
10. As described in note 61 to the standalone financial statements, the Company’s ‘Revenue from operations’ includes broadcasters’ share in subscription income from pay channels, which has correspondingly been presented as an expense which is not in accordance with the requirements of Ind AS-115, ‘Revenue from Contracts with Customers’. Had the management disclosed the same on net basis, the ‘Revenue from operations’ and the ‘Pay channel costs’ each would have been lower by ^ 3,063.47 million for the year ended 31 March 2024, while there would have been no impact on the net loss for the year ended 31 March 2024.
11. As described in note 52 to the standalone financial statements, we have been provided with a listing of ongoing litigations before NCLT, Mumbai, including the matter referred to in paragraph 3 above pertaining to the treatment of claims/liabilities/obligations arising during the period of stay obtained by one of the Directors (powers suspended) of the Company before NCLAT upto the date of dismissal of such appeal, i.e., 07 March 2023 upto 10 August 2023. However, in the absence of an evaluation on these ongoing litigations from the management, we are unable to obtain sufficient appropriate audit evidence to evaluate, assess and comment on the impact, if any, on the accompanying standalone financial statements including recognition, measurement and disclosures, that may arise had we been provided access to above-mentioned information.
12. As described in note 60 to the standalone financial statements, the Company has not carried out recoverability and/ or impairment assessment for its subsidiaries namely Central Bombay Cable Network Limited, Indian Cable Net Company Limited, Siti Broadband Services Private Limited, Siti Cable Broadband South Limited, Siti Faction Digital Private Limited, Siti Global Private Limited, Siti Guntur Digital Network Private Limited, Siti Jai Maa Durgee Communications Private Limited, Siti Jind Digital Media Communications Private Limited, Siti Jony Digital Cable Network Private Limited, Siti Karnal Digital Media Network Private Limited, Siti Krishna Digital Media Private Limited, Siti Networks India LLP, Siti Prime Uttaranchal Communication Private Limited, Siti Sagar Digital Cable Network Private Limited, Siti Saistar Digital Media Private Limited, Siti Siri Digital Network Private Limited, Siti Vision Digital Media Private Limited, Variety Entertainment Private Limited and Master Channel Community Network Private Limited. In absence of sufficient and appropriate audit evidence, we are unable to comment on the balances outstanding from such subsidiary companies in the books of Siti Networks Limited along with the impairment in carrying value of investments, if any, as at and for the year ended 31 March 2024.
13. As described in note 62 to the standalone financial statements, on 3 July 2024 the Resolution Professional has submitted an application against erstwhile directors/ directors (powers suspended) of the Company’s management under Section 25(2)(j) read with Section 66 of the Insolvency and Bankruptcy Code, 2016, and Regulation 35(A)(3) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.This application seeks relief in connection with certain allegedly fraudulent, undervalued and preferential transactions conducted by the Corporate Debtor under the previous management aggregating approx. ^ 3,254.90 million for the review period 10 August 2018 to 10 August 2023 (subject to the outcome of the matter currently sub-judice with NCLT, Mumbai), and the matter is currently pending with hon’ble NCLT in Mumbai. However, we are not aware of any counter-application^) filed by the respondents to the aforementioned application, and we have also
not been provided with the transaction audit report which forms the basis of such application. Accordingly, in absence of sufficient appropriate audit evidence and pending resolution of this matter, we are unable to comment on any potential impact on the accompanying standalone financial statements for the year ended 31 March 2024, including any issues related to recognition, measurement, or disclosures.
14. The Company has not carried out physical verification of the property, plant and equipment during the year. Accordingly, material discrepancies, if any, could not be ascertained and therefore, we are unable to comment on the existence of such property, plant and equipment and its related impact, if any, on the standalone financial statements for the year ended 31 March 2024 including recognition, measurement and disclosures, that may arise had the Company carried out such physical verification.
15. As described in note 55 to the standalone financial statements, which indicates that the Company has incurred a net loss (including other comprehensive income) of ^ 1,502.47 million during the year ended 31 March 2024, and as of that date, the Company’s accumulated losses amount to ^ 27,925.22 million resulting in a negative net worth of ^ 10,989.95 million and its current liabilities exceeded its current assets by ^ 15,368.42 million resulting in negative working capital. The above factors along with matters stated in paragraphs 3 to 14 above and other matters as set forth in note 55, indicate a material uncertainty, which may cast significant doubt about the Company’s ability to continue as a going concern. Accordingly, there exists a material uncertainty about the company’s ability to continue as a going concern since the future of the Company is dependent upon the successful implementation of a Resolution plan. The standalone financials statements have been prepared by the management assuming going concern basis of accounting, for which we have not been able to obtain sufficient appropriate audit evidence regarding the use of such assumption, based on management’s assessment of the successful outcome of the ongoing Resolution process with no adjustments having been made to the carrying value of the assets and liabilities and their presentation and classification in the Balance Sheet.
16. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (‘ICAI’) together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We draw attention to the above-mentioned points in the Basis for Disclaimer of Opinion section of our report for which we have been unable to receive sufficient and appropriate audit evidence to provide an opinion on the accompanying standalone financial statements.
Key Audit Matters
17. 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 financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Except for the matters stated in the Basis for Disclaimer of Opinion, there are no Key Audit matters to be reported in our report.
Information other than the Financial Statements and Auditor’s Report thereon
18. The Company’s management is responsible for the other information. The other information comprises the information included in the Annual Report but does not include the standalone financial statements and our auditor’s report thereon. The Annual Report is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other information and we 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 when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Standalone
Financial Statements
19. The powers of the Board of Directors of the Company have been suspended and the management of the affairs of the Company and power of the Board of Directors are now vested with the Resolution Professional since 16 August 2023 and the standalone financial statements is being signed by the Resolution Professional in exercise of such powers and has been approved by the Resolution Professional and the Chief Executive Officer (together referred to as ‘management’). The Company’s Management is responsible for the matters stated in section 134 (5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Ind AS specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
20. In preparing the 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.
21. Those charged with governance is also responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Standalone Financial Statements
22. 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 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 Standards on Auditing 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.
23. As part of an audit in accordance with Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to standalone 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 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 financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation;
24. 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.
25. 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.
26. 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 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.
Report on Other Legal and Regulatory Requirements
27. Based on our audit, we report that the Company has not paid or provided for any managerial remuneration during the year. Accordingly, reporting under section 197(16) of the Act is not applicable.
28. As required by the Companies (Auditor’s Report) Order, 2020 (‘the Order’) issued by the Central Government of India in terms of section 143 (11) of the Act, we give in the Annexure I, a statement on the matters specified in paragraphs 3 and 4 of the Order.
29. Further to our comments in Annexure I, as required by section 143(3) of the Act, based on our audit, we report, to the extent applicable, that:
a) except for the effects of the matter(s) described in the Basis for Disclaimer of Opinion section of our report, we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit of the standalone financial statements;
b) except for the effects of the matter(s) described in the Basis for Disclaimer of Opinion section in our opinion and matters stated in paragraph 29(i)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014, 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 financial statements dealt with by this report are in agreement with the books of account;
d) except for the effects of the matter described in the Basis for Disclaimer of Opinion section, in our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
e) the going concern matter described in Basis for Disclaimer of Opinion section, in our opinion, may have an adverse effect on the functioning of the Company;
f) the powers of the Board of Directors of the Company have been suspended and no written representations have been received from the Directors (power suspended) and
hence not taken on record by the Company, accordingly we are unable to comment on their disqualification as per section 164(2) of the Act;
g) the modifications relating to the maintenance of accounts and other matters connected therewith are as stated in the paragraph 30(b) above on reporting under Section 143(3)(b) of the Act and paragraph 30(i)(vi) below on reporting under Rule 11 (g) of the Companies (Audit and Auditors) Rules, 2014;
h) we have also audited the internal financial controls with reference to financial statements of the Company as on 31 March 2024 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report dated 28 September 2024 as per Annexure II contains a disclaimer of opinion; and
i) with respect to the other matters to be included in the Auditor’s 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:
i. the Company, as detailed in note 37 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2024;
ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2024;
iii. there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2024;
iv. (a) The management has represented that, to the best of its knowledge and belief as disclosed in note 67(A)(i) to the financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any persons or entities, including foreign entities (‘the 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 (‘the Ultimate Beneficiaries’) or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;
(b) The management has represented that, to the best of its knowledge and belief, as disclosed in note 67(A)(ii) to the financial statements, no funds have been received by the Company from any persons or entities, including foreign entities (‘the 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 such audit procedures performed as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the management representations under sub-clauses (a) and (b) above contain any material misstatement.
v. The Company has not declared or paid any dividend during the year ended 31 March 2024.
vi. The reporting under Rule 11 (g) of the Companies (Audit and Auditors) Rules, 2014 is applicable from 01 April 2023.
Based on our examination which included test check, the Company has used accounting software for maintaining its books of accounts, which have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transaction recorded in the software except that the audit trail feature is not enabled on some tables at application level for direct changes when using certain access right(s) and also for certain changes made using administrative access right(s).
Further during the course of audit we did not come across any instance(s) of audit trail feature being tampered with respect to accounting software.
For DNS & Associates
Chartered Accountants Firm’s Registration No.: 006956C
Ankit Marwaha
Partner
Membership No.: 518749 UDIN: 24518749BKHIIU3633
Place: Noida
Date: 28 September 2024
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