To the Members of MULTI COMMODITY EXCHANGE OF INDIA LIMITED
Report on the Standalone Ind AS Financial Statements
Opinion
We have audited the accompanying standalone Ind AS financial statements of MULTI COMMODITY EXCHANGE OF INDIA LIMITED (“the Company”), which comprise the balance sheet as at March 31,2024, the statement of profit and loss (including other comprehensive income), the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the standalone financial statements, including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “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 31,2024, 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 in accordance with the Standards on Auditing, as specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the audit of the standalone financial statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the 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 financial statements.
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. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the standalone financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone financial statements.
Sr.
No.
Key Audit Matter
Auditor’s Response
1.
Legal and Taxation Matters:
Refer note 1.3, note 1.2.P, and note 31 of standalone financial statements.
There are legal and tax cases against the Company and demand is raised against the Company. The Company has disputed such demands by litigating at relevant statutory forum.
For pending litigations against the Company, high level of management judgement is required to determine whether an obligation exists and a provision is required or disclosures, if any.
The measurement of the provision is based on the best estimate of the expenditure required to settle the present obligation.
Considering the judgement and estimate involved, matter is considered as a key audit matter.
Principal Audit Procedures:
For legal and tax matters our procedures included the
following:
• Obtain list of legal and tax cases against the Company and gained understanding thereof.
• Testing key controls surrounding litigation and tax procedures;
• Performing substantive procedures on the underlying calculations supporting the provisions recorded;
• Considering external legal/tax consultants opinions obtained by the management on possible outcome of litigation;
• Meeting with the management and reading subsequent Companies correspondence;
• Discussing open matters with the Companies litigation and tax teams;
• Assessing the Management's conclusions through understanding precedents set in similar cases; and
• For the significant provisions made, understood and assessed the provisioning methodology. Tested the underlying data and assumptions used in the determination of the provisions recorded.
• For cases where a provision was not recognized, evaluated the adequacy of disclosure made in the Ind AS financial statements.
2.
Valuation of Investments and its impairment:
Quoted investments and unquoted investments represent the most significant amount on the balance sheet. The total of these investments aggregating to T 1,13,691 Lakh represented 62.77% of total assets of the Company as at March 31,2024.
There is inherent uncertainty relating to the assumptions supporting such estimates and risk that the fair value of investments is not determined appropriately and hence valuation of investments and its impairment is considered as a key audit matter.
• We assessed the design and implementation of controls over valuation and existence of investments.
• For the fair valuation models, we understood and assessed the methodology used. We tested the underlying data and assumptions used in the determination of the fair value.
• We traced the quantity held from the independent confirmation provided by the Custodian and Fund houses.
• We tested the valuation of the quoted and unquoted investments to independent pricing sources.
• Assessed appropriateness and arithmetical accuracy of fair value disclosures pertaining to investments.
3.
Extension of Software Support Service:
The Company had entered into an agreement with Tata Consultancy Services Limited (TCS), according to which the new Commodity Derivative Platform (CDP) was to be developed, tested and delivered by TCS by September 30, 2022.
Since the new platform is under development, the Company considering the exigency to ensure continuity of the existing commodity trading and clearing platform, continued with the services of the existing vendor, 63 Moons Technologies Limited, initially for a period for quarter ending December 2022 for T 60 crore (plus applicable taxes). Later these services were extended for another two quarters ending June 30, 2023 for T 81 crore per quarter (plus applicable taxes) as per the minimum period of services offered by the vendor.
• We obtained understanding, evaluated the design and tested the operating effectiveness of controls related to procurement to pay cycle of this expenditure.
• We tested the internal approval notes, purchase order and other documentation to ensure that the expenditure/ payment on extension of software support service contract was appropriately approved by the MD & CEO, Chief Financial Officer and other concerned HOD's as per the delegated authority matrix.
• We obtained an understanding of the Company's policies and procedures in respect of extension of software support service and approval process by the board of directors.
Further, due to delay of the CDP platform, the Company had decided to extend the support services being rendered by the vendor 63 Moons Technologies Limited for further two quarters, being the minimum period of services offered by the vendor, beginning from July 01,2023 at a consideration of ? 125 crore per quarter.
We considered extension of software support service expenditure as key audit matter due to significance of amount involved on such item during the year ended March 31,2024.
•
Assessed the disclosures made by the Company in this regard.
4.
Development of New Commodity Derivatives Platform (Intangible Assets Under Development, Intangible Assets and Property Plant and Equipment):
The Company has awarded the contract of implementation of the new commodity derivatives platform project to Tata Consultancy Services Limited (TCS) on February 04, 2021. Since implementation/development of new commodity derivatives platform took a substantial period of time to get ready for intended use and due to their materiality in the context of the Balance Sheet of the Company, this is considered to be an area with significant effect on the overall audit strategy and allocation of resources in planning and completion our audit. With regard to above capital project, management has identified specific expenditure including employee costs and other overheads relating to each of the assets in the above capital project and has applied judgement to assess if the costs incurred in relation to new commodity derivative platform meet the recognition criteria of Intangible Assets and Property, Plant and Equipment in accordance with Ind AS 38 and Ind AS 16.
This has been determined as a key audit matter, as the Company has incurred significant expenditure on the new commodity derivatives platform and elements of cost that are eligible for capitalization are appropriately capitalized in accordance with the recognition criteria provided in Ind AS 38 and Ind AS 16, as referred by the total value of additions in intangible assets under development, intangible assets and property, plant and equipment in note 2A, 3A & 3B of the standalone financial statements.
• We obtained an understanding of the Company’s capitalization policy and assessed for compliance with the relevant accounting standards.
• We obtained understanding, evaluated the design and tested the operating effectiveness of controls related to capital expenditure and capitalization of assets.
• We tested the internal approval notes and other documentation to ensure that the projects were appropriately approved by the MD & CEO, Chief Financial Officer and other concerned HOD’s as per the delegated authority matrix.
• We Assessed whether initial assumptions applied in determining project feasibility continues to hold true and whether sufficient economic benefits are likely to flow from the projects to support the values to be capitalised.
• We obtained understanding on management assessment relating to progress of project and their intention to bring the assets to its intended use.
• Ensured adequacy of disclosures in the standalone financial statements on the management judgements in such cases.
• Testing a sample of projects to ensure appropriate capitalisation of qualifying employee cost and cost of external contractors/parties with underlying supporting documents to ascertain nature of costs and basis for allocation, where applicable, and evaluated whether they meet the recognition criteria provided in the India Accounting Standard (Ind AS) 38 Intangible Assets and (Ind AS) 16 Property, Plant and Equipment.
Information Other than the Standalone Financial Statements and Auditor’s Report Thereon
The Company’s Board of Directors are 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 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, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
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 Companies Act, 2013 (“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, statement of changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the accounting Standards specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making 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 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 financial statements, the Board of Directors 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.
Those Board of Directors are also responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities 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 control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.
• 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.
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 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 the Companies (Auditor’s Report) Order, 2020 (“the Order”), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the ‘ANNEXURE A’ a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. 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 balance sheet, statement of profit and loss including other comprehensive income, the statement of cash flows and statement of changes in equity dealt with by this report are in agreement with the books of account;
(d) In our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
(e) On the basis of the written representations received from the directors as on March 31, 2024 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31,2024 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 over financial reporting of the Company with reference to these standalone financial statements and the operating effectiveness of such controls, refer to our separate report in “ANNEXURE B”. Our report expresses an unmodified opinion on adequacy and operative effectiveness of the Company’s internal financial controls over financial reporting;
(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 / provided by the Company to its directors during the year is in accordance with the provisions of section 197 read with Schedule V 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, 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 31 to the standalone financial statements;
ii. The Company was not required to recognise a provision as at March 31,2024, under the applicable law or accounting standards, as it does not have any material foreseeable losses on long-term contracts. The Company did not have any derivative contracts as at March 31, 2024 - Refer note 50 to 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 51 to the standalone financial statements;
iv. A) The management has represented that, to the best of its knowledge and belief, as disclosed in
the note 46.c.v to the financial statements, 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 persons or entities, including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediaries shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company(“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
B) The management has represented that, to the best of its knowledge and belief, as disclosed in the note 46.c.v to the financial statements, 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, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Parties (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
C) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representation under sub-clause (A) and (B) contain any material misstatement.
v. The final dividend paid by the Company during the year which was declared for the previous year is in accordance with section 123 of the Act to the extent it applies to payment of dividend. As stated in note 45 to the standalone Ind AS financial statements, the Board of Directors of the Company has proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.
vi. Based on our examination, which included test checks, the Company has used accounting software for maintaining its books of account for the financial year ended March 31, 2024 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 our audit we did not come across any instance of the audit trail feature being tampered with.
For SHAH GUPTA & Co.
Chartered Accountants
Firm Registration No.: 109574W
Vedula Prabhakar Sharma
Partner
Membership No.: 123088
UDIN: 24123088BKARNX4399
Place : Mumbai
Date : April 23, 2024