To The Members of Indus Towers Limited (formerly Bharti Infratel Limited)
Report on the Audit of the Standalone Financial Statements Opinion
We have audited the accompanying standalone financial statements of Indus Towers Limited (formerly Bharti Infratel Limited) (“the Company”), which comprise the Standalone Balance Sheet as at March 31, 2023 and the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flows for the year then ended, and a summary of significant accounting policies and other explanatory information (hereinafter referred to as “the standalone financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (“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 31,2023, its profit, its total comprehensive income, its changes in equity and its cash flows for the year then ended.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (“SAs”) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor’s Responsibility 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 (“ICAI”) together with the ethical requirements that are relevant to our audit of the standalone 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 obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
Emphasis of Matter
Material uncertainty at one of the largest customers of the Company and its consequential impact on Company’s business operations
We draw attention to note 48 of the standalone financial statements, which describes the impact on business operations, receivables, property, plant and equipment and financial position of the Company on account of one of the largest customer’s financial conditions and its ability to continue as a going concern. The customer’s assumption of going concern is essentially dependent on its ability to raise additional funds as required and successful negotiations with lenders and vendors for continued support and generation of cash flow from its operations that the said customer needs to settle its liabilities as they fall due.
Our opinion is not modified in respect of the above matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current 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. We have determined the matters described below to be the key audit matters to be communicated in our report.
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Sr.
No.
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Key Audit Matters
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Auditor’s Response
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1
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Revenue recognition - accuracy of revenue recorded
We identified revenue recognition as a key audit matter because there is a risk around the accuracy of revenue recorded at rates other than the approved contracts / agreements. This is because the Company’s billing systems are complex and process large volume of data, including combination of different components of revenue.
Further, the Company has multiple reconciliation matters with their customers and the Company uses significant estimates and judgements to assess the adequacy of any uncertainty involved with respect to potential reversal of revenue in future.
(Refer to notes 4.1(i) and 24 to the standalone financial statements)
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Principal audit procedures performed:
Our audit approach consisted evaluation of design and implementation of controls, and testing the operating effectiveness of the internal controls over:
• Capturing and recording of revenue transactions;
• Authorisation of rate changes and input of the rate changes into the billing systems;
• Preparation and validation of the billing schedule;
• Calculations of amounts billed to operators, in line with underlying supporting documents; and
• Assessment of adequacy of revenue reversals.
We tested a sample of invoices issued to operators to ensure that the revenue recorded are agreeing to the relevant underlying supporting documentation. We also performed substantive analytical procedures to test the recorded rental revenue.
We involved our internal IT specialists to test IT general controls and application specific controls surrounding billing system, including testing of system generated reports used in our audit.
We challenged management estimates around appropriateness of revenue recognition and reversals of revenue in future on account of uncertainty by examining empirical data and historical trend of negotiation patterns with the customers.
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2
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Recognition of revenue and recoverability of receivables from one of largest customers of the Company (“the Customer”)
The Customer accounts for substantial part of revenue from operations for the year ended March 31, 2023 and constitutes a significant part of outstanding trade receivables and unbilled revenue as at March 31,2023.
The Customer in its published unaudited financial results for the quarter and nine months ended December 31, 2022 had indicated that its ability to continue as a going concern is dependent on its ability to raise additional funds as required, successful negotiations with lenders and vendors for continued support and generation of cash flow from operations that the said customer needs to settle its liabilities as they fall due.
The matter has been identified as key audit matter due to the significance of matter and involvement of significant judgements and estimation around appropriateness of revenue to be recognized by the Company for services rendered to the Customer and assessment relating to the adequacy of allowances while evaluating the recoverability of receivables.
(Refer to note 48 to the standalone financial statements and emphasis of matter paragraph included above)
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Principal audit procedures performed:
We tested the design and implementation and operating effectiveness for internal controls around:
• assessment of recognition of revenue (including unbilled revenue) from the Customer; and
• evaluation relating to the adequacy of allowances while assessing the recoverability of receivables from the Customer.
We challenged management judgements and estimation around the uncertainties involved in ultimate collectability of revenue (including unbilled revenue) from the customer and appropriateness of revenue recognised by the Company.
We challenged the adequacy of allowances while assessing the recoverability of receivables from the Customer considering the latest developments, public information on funding plan, financial results, public news related to the Customer and the various correspondences made with the Customer during the year.
We obtained the copy of payment plans agreed with the Customer and evaluated the collection patterns over revenue recognised to assess whether collections have been received as per the agreed plan.
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Sr.
No.
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Key Audit Matters
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Auditor’s Response
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3
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Contingent Liabilities and Provisions: Disputed tax matters
The Company is subjected to a number of significant income tax litigations and indirect tax litigations (“litigations”) which are in appeal before various judicial forums.
The eventual outcome of these litigations is uncertain and the positions taken by the management are based on the application of significant judgement and estimation. The review of these matters requires application and interpretation of tax laws and reference to applicable judicial pronouncements.
Given the uncertainty and application of significant judgment in this area in terms of the eventual outcome of litigations, we determined this to be a key audit matter.
(Refer to notes 4.1 (p)(ii) and 36(b) to the standalone financial statements)
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Principal audit procedures performed:
Our audit procedures included evaluation of design and implementation of controls and testing of operating effectiveness of the company’s controls over identification of litigations and evaluation of possible outcomes around litigations.
We obtained the list of litigations from the management and reviewed their assessment of the likelihood of outflow of economic resources being probable, possible or remote in respect of these litigations.
We involved our internal direct and indirect tax specialists, who obtained an understanding of the current status of the litigations, conducted discussions with the management, reviewed independent legal advice obtained by management, if any, and considered relevant legal provisions and available precedents to challenge management’s underlying assumptions in estimating the possible outcome of these litigations.
We also assessed the adequacy and appropriateness of the disclosures made by the management in the notes to the standalone financial statements.
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Information Other than the Financial Statements
and Auditor’s Report Thereon
• The Company’s Board of Directors is responsible for the other information. The other information comprises the information included in the Business Responsibility and Sustainability Report, Management Discussion and Analysis Report, Board’s Report including Annexures to the Board’s Report and Report on Corporate Governance, but does not include the consolidated financial statements, standalone financial statements and our auditor’s reports thereon.
• Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
• In connection with our audit of the standalone financial statements, our responsibility is to read the other information and 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.
• If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income/loss, changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. 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 financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, management is responsible for assessing the 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 the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Company’s Board of Directors are also responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibility for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an 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 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 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 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 the 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.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal financial control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our 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
1. As required by Section 143(3) of the Act, based on our
audit, 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/loss, the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flows dealt with by this Report are in agreement with the books of account.
d) In our opinion, the aforesaid standalone financial statements comply with Ind AS specified under Section 133 of the Act.
e) On the basis of the written representations received from the directors as on March 31, 2023, taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023, from being appointed as a director in terms of Section 164(2) of the Act.
f) With respect to the adequacy of the internal financial controls with reference to the standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure A”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls with reference to the standalone financial statements.
g) With respect to the other matters to be included in the Auditor’s 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.
h) 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 has disclosed the impact of pending litigations on its financial position in its standalone financial statements. Refer note 36(b) of the standalone financial statements.
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses. Refer note 44 of the standalone financial statements.
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company. Refer note 45 of the standalone financial statements.
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 other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, 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. Refer note 49 of the standalone financial statements.
(b) The Management has represented that, to the best of its knowledge and belief, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, 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. Refer note 49 of the standalone financial statements.
(c) Based on the audit procedures performed 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 subclause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
v. The Company has not declared or paid any dividend during the year and has not proposed final dividend for the year. Refer note 13b of the standalone financial statements relating to interim dividend for the previous year.
vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of
recording audit trail (edit log) facility is applicable to the Company w.e.f. April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 as amended is not applicable for the financial year ended March 31,2023.
2. 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 B” a statement on the matters specified in paragraphs 3 and 4 of the Order.
For Deloitte Haskins & Sells LLP
Chartered Accountants (Firm’s Registration No. 117366W/W-100018)
Anup Kumar Sharma
(Partner)
Place: Gurugram (Membership No. 063828)
Date: April 26, 2023 (UDIN: 23063828BGXOWH1922)
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