We have audited the accompanying financial statements of Eastern Treads Limited ('the Company'), which comprise theBalance Sheet as at March 31, 2024, the Statement of Profit and Loss (including other comprehensive income), theStatement of Changes in Equity and the Statement of Cash flows for the year then ended and the notes to the financialstatements, including a summary of significant accounting policies and other explanatory information (hereinafter referredto as “the financial statements”).
In our opinion and to the best of our information and according to the explanations given to us the aforesaid financialstatements give the information required by the Companies Act 2013 (“the Act”) in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with theCompanies (Indian Accounting Standards ) Rules, 2015,as amended, (“IND AS”) and other accounting principles generallyaccepted in India, of the state of affairs of the Company as at March 31, 2024, and its loss, total comprehensive income,its cash flows and the changes in equity for the year ended on that date.
We conducted our audit in accordance with the Standard of Auditing (SAs) specified under section 143(10) of the Act.Our responsibility under those SAs are further described in the Auditor's Responsibilities for the Audit of the FinancialStatements section of our report. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Act and the Rules made thereunder and we have fulfilled our ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidencewe have obtained is sufficient and appropriate to provide a basis for our opinion on the financial statements.
In our opinion, the financial statements give a true and fair view of the state of affairs of the Company as at March 31,2024 and of its financial performance and cash flows for the year then ended in accordance with IND AS. Our audit didnot identify any matters that required an “Emphasis of Matter” paragraph, indicating that there were no issues requiringspecial emphasis or disclosure beyond what is already included in the financial statements.
Key audit matter is a matter that, in our professional judgement, were of most significance in our audit of the financialstatements of the current year. These matters were addressed in the context of our audit of financial statements as awhole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determinedthe matters described below to be key audit matter to be communicated in our report.
Key Audit Matter
Auditor's Response
1. Valuation of Inventory
The net carrying value of inventory held by the Companyas on 31 March 2024 amounts to ' 714.72 lakhs asdisclosed in note 2.7 to accompanying standalone financialstatements, which is 20.21% of total assets of the companyas on that date. Further, refer to note 1.15 for accountingpolicies relating to valuation of inventory adopted by themanagement in accordance with Ind AS 2, Inventories ('IndAS 2').
Inventories are valued at the lower of cost and net realisablevalue item wise. Cost includes costs incurred in bringingthe inventory to its present location and condition as furtherdetailed below:
i) Raw Materials
Cost includes cost of purchase net of duties and taxes thatare recoverable from the government and other costsincurred in bringing the inventories to their present locationand condition. Cost is determined basis using first-in, first-out ('FIFO') method of computation.
ii) Finished goods and work in progress:
Cost includes cost of direct materials and labour and aproportion of manufacturing overheads determined basedon the normal operating capacity. Cost is determined usingweighted average method of computation
Net realisable value is the estimated selling price in theordinary course of business, less estimated costs ofcompletion and the estimated costs necessary to make thesale.
The management also identifies slow-moving, obsolete anddamaged inventory on a periodical basis and makes anappropriate provision for obsolescence for such items asat reporting date.
The aforesaid inventory valuation and estimation ofprovision for obsolescence is manually performed by themanagement on the reporting date and involve significantestimates and judgements.
Considering the size, the assumptions used in the valuationand the complexities involved significant auditor attentionis required to test accuracy of inventory valuation, and thus,we have identified valuation of inventory as a key auditmatter in the current year audit.
Our audit procedures in relation to valuation of inventoryincluded, but were not limited to, the following:
1) Evaluated the design and implementation, and testedthe operating effectiveness of key internal controls overmeasurement of inventory balances as at year end.
2) Assessed the appropriateness of the principles used inthe valuation of inventory in accordance with therequirements of Ind AS 2.
3) Tested, on a sample basis, the accuracy of costcomputed for raw material inventory by verifying the actualcosts of latest purchase of raw materials applying theprinciple of FIFO method, by inspection of supportingdocuments.
4) Tested, on a sample basis, the accuracy of costcomputed for work-in-progress and finished goodsinventory by recomputing the weighted average costcomputation. Further, in the process, tested the cost ofdirect materials used as per bills-ofmaterial (BOM), andallocation of labour and manufacturing overheads to suchfinished goods;
5) Obtained management working of valuation of inventoryand reconciled the quantities with the stock verificationreports to ensure completeness of the underlying data onwhich valuation is performed by the management andtested the mathematical accuracy of such workings.
Recomputed the overall allocation computation ofoverheads on inventory and ensured consistency ofassumptions used therein by the management with priorperiods.
Tested, on sample basis, the inventory aging report andnet realisable value of inventories basis the latest marketprices of the products.
Evaluated the process followed by the management foridentification of slow-moving, obsolete and damagedinventory items and accordingly assessed reasonablenessof provision for obsolescence estimated by the Company.
Evaluated the appropriateness and adequacy ofdisclosures presented by the management relating toinventory balances in the financial statements inaccordance with applicable financial reporting framework.
2. Trade Receivables
Our audit procedures in relation to valuation of ECL
The total balance of trade receivable for the year ended
included, but were not limited to, the following:
31 March 2024 is ' 1209.44 lakhs net of provision of
' 284.5 lakhs as disclosed in note No 2.3, to
1) Evaluated the design and implementation, and tested
accompanying standalone financial statements, which is
the operating effectiveness of key internal controls over
34.19% of total assets of the company as on that date.
measurement of ECL and Trade receivables balances as
Further, refer to note 1.17(d) for accounting policies relating
at year end.
to valuation of trade receivables adopted by the
management in accordance with Ind AS 109, Financial
2) Assessed the appropriateness of the principles used
Instruments ('Ind AS 109').
in the valuation of ECL in accordance with the
requirements of Ind AS 109 and Ind AS 37.
For recognition of impairment loss on other financial assets
3) Sought external confirmations from a selected sample
and risk exposure, the Company determines that whether
of debtors.
there has been a significant increase in the credit risk since
initial recognition. If credit risk has not increased
4) Obtained management working of ECL and reconciled
significantly, 12-month ECL is used to provide for
the inputs used with the ageing reports to ensure
impairment loss. However, if credit risk has increased
completeness of the underlying data on which valuation
significantly, lifetime ECL is used. If, in a subsequent period,
is performed by the management and tested the
credit quality of the instrument improves such that there is
mathematical accuracy of such workings.
no longer a significant increase in credit risk since initial
recognition, the Company reverts to recognising
impairment loss allowance based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from
all possible default events over the expected life of a
financial instrument. The 12-month ECL is a portion of the
lifetime ECL which results from default events that are
possible within 12 months after the reporting date.
The Company's financial statements include a significant
amount of financial assets subject to ECL measurement.
ECL involves complex models and significant judgement
in determining the credit risk parameters and the calculation
of future cash flows. Given the complexity and the high
degree of estimation uncertainty, we considered ECL to
be a key audit matter.
• The Company's management and Board of Directors are responsible for the other information. The other informationcomprises the information included in the Company's annual report, but does not include the financial statements andour auditor's report thereon. The annual report is expected to be made available to us after the date of this auditor'sreport.
• Our opinion on the financial statements does not cover the other information and we do not and will not expressany form of assurance conclusion thereon.
• In connection with our audit of the financial statements, our responsibility is to read the other information identifiedabove when it becomes available and, in doing so, consider whether the other information is materially inconsistent withthe financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materiallymisstated.
• When we read the management report, if we conclude that there is a material misstatement therein, we are requiredto communicate the matters to those charged with governance as required under SA 720 'The Auditor's responsibilitiesRelating to Other Information'.
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 financial statements that give a true and fair view of the financialposition, financial performance including other comprehensive income, and cash flows and changes in equity of theCompany in accordance with the IND AS and other accounting principles generally accepted in India. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and other irregularities; selection and applicationof 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 theaccuracy and completeness of the accounting records, relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the management is responsible for assessing the Company's ability to continue asa going concern, disclosing, as applicable, matters related to going concern and using the going concern basis ofaccounting unless the management either intends to liquidate the Company or to cease operations, or has no realisticalternative but to do so.
The Board of Directors are also responsible for overseeing the Company's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free frommaterial misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonableassurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will alwaysdetect 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 takenon the basis of these financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticismthroughout the audit. We also:
• Identify and assess the risks of material misstatement of the 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 appropriateto provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than forone resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the overrideof internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible forexpressing our opinion on whether the company has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by the management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based onthe audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we arerequired to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosuresare inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor'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 financial statements, including the disclosures, andwhether the financial statements represent the underlying transactions and events in a manner that achieves fairpresentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the company to express anopinion on the financial statements.
Materiality is the magnitude of misstatements in the financial statements that, individually or in aggregate, makes itprobable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced.We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work; and (ii) to evaluatethe effect of any identified misstatements in the 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 ouraudit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirementsregarding independence, and to communicate with them all relationships and other matters that may reasonably bethought 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 utmostsignificance in the audit of financial statements of the current year and are therefore the key audit matter.We describethese matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, inextremely rare circumstances, we determine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
A. As required by the Companies (Auditor's Report) Order, 2020 (“the Order”), issued by the Central Government of Indiain terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in Annexure “A” a statement on thematters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
B. As required by Section 143 (3) of the Act, based on our audit we report that:
1. We have sought and obtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit.
2. In our opinion, proper books of account as required by law have been kept by the company so far as it appearsfrom our examination of those books.
3. The company does not have any branches and so the provisions of section 143(8) are not applicable to thecompany.
4. The Balance Sheet, the Statement of Profit and Loss (including other comprehensive income), the Statement ofChanges in Equity and the Statement of Cash flows dealt with by this Report are in agreement with the booksof account.
5. In our opinion, the aforesaid financial statements comply with the Ind AS specified under Section 133 of the Act.
6. On the basis of the written representations received from the directors as on 31st March, 2024 taken on recordby the Board of Directors, none of the directors is disqualified as on 31st March, 2024 from being appointed asa director in terms of Section 164 (2) of the Act.
7. With respect to the adequacy of the internal financial controls over financial reporting of the Company and theoperating effectiveness of such controls, refer to our separate Report in 'Annexure B'. Our report expresses anunmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controlsover financial reporting.
8 With respect to the matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies(Audit and Auditors)Rules, 2014, in our opinion and to the best of our information and according to the explanationgiven to us:
i. The Company, as detailed in note 2.30 to the standalone financial statements, has disclosed the impact ofpending 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 wereanymaterial foreseeable losses as at 31 March 2024;
iii. We are given to understand that the company is in the process of transferring the unpaid dividend amountingto Rs.1,81,862 pertaining to the year ended March 31, 2017 to the Investor Education and Protection Fund(IEPF) as of 31 March 2024.
iv.
(a) The Management has represented that, to the best of its knowledge and belief, no funds (which arematerial either individually or in the aggregate) have been advanced or loaned or invested (either fromborrowed funds or share premium or any other sources or kind of funds) by the Company to or in anyother person or entity, including foreign entity (“Intermediaries”), with the understanding, whetherrecorded 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 UltimateBeneficiaries
(b) The Management has represented, that, to the best of its knowledge and belief, no funds (which arematerial either individually or in the aggregate) have been received by the Company from any personor entity, including foreign entity (“Funding Parties”), with the understanding, whether recorded in writingor otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons orentities 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 thecircumstances, nothing has come to our notice that has caused us to believe that the representationsunder the sub-clause (a) and (b) contain any material misstatement.
v. Since the Company has not declared or paid any dividend during the year, the question of commenting
on whether dividend declared or paid is in accordance with Section 123 of the Companies Act, 2013does not arise.
C. Based on our examination which included test checks, the Company has used an accounting software formaintaining its books of account for the financial year ended 31 March 2024 which has a feature of recordingaudit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recordedin the software. Further, during the course of our audit we did not come across any instance of the audit trailfeature being tampered with.
Firm Reg. No. 006310S
Place: Kochi Allen Joseph
Date : 29-05-2024 Partner
M No. 228498
UDIN: 24228498BKDGLN7200