Director's Report

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Coffee Day Enterprises LtdIndustry : Hotels
BSE Code:539436NSE Symbol:COFFEEDAYP/E(TTM):0
ISIN Demat:INE335K01011Div & Yield %:0EPS(TTM):0.01
Book Value (Rs ):88.0150338Market Cap (Rs Cr.):722.06Face Value(Rs):10

BOARD'S REPORT

Dear Members,

Your Directors have pleasure in presenting their 16th Annual Report on business and operations along with the Audited financial statements and the Auditor's report of the Company for the financial year ended 31st March, 2024.

Financial Highlights:

(Amount in Rs. Crores)
Particulars Coffee Day Enterprises Limited Coffee Day Enterprises Limited Coffee Day Global Limited Coffee Day Global Limited
(Consolidated) (Consolidated) (Consolidated) (Consolidated)
FY 24 FY 23 FY 24 FY 23
Net Operational Revenue 1013 924 966 869
Finance charges 30 87 15 63
Depreciation 132 161 129 157
Profit/(Loss) Before Tax (369) (382) 98 (63)
Income Tax (62) 5 (57) 4
Total Profit/ (Loss) attributable to the Owners of the Company. (323) (380) 155 (68)

Performance Overview:

During the fiscal year ended 31st March 2024, Net revenues increased by 9.63% to Rs.1013 Crores in FY 2023-24, compared with Rs. 924 Crores in FY 2022-23.

State of The Company's Affairs:

The state of the Company affairs forms an integral part of Management Discussion & Analysis Report.

Dividend:

The Board of Directors of the Company has not recommended any dividend for the financial year 2023-24.

Transfer to Reserves:

In accordance to the provisions of Section 134(3)(j) of the Companies Act, 2013, (hereinafter "the Act") the Company has not proposed any amount to transfer to the General reserves of the Company for the financial year 2023-24.

Deposits:

The Company has not accepted any Deposits under Section 73 and Chapter V of the Act and the rules made thereunder.

Particulars of Loans, Guarantees or Investments:

The details of the loans, guarantees and investments are provided in the notes to the audited financial statements annexed with the Annual report.

Subsidiaries, Joint Ventures and Associate Companies:

As on 31st March, 2024, the Company has 18 subsidiaries (including step-down subsidiaries), 4 Associate Companies and 3 Joint Ventures. The details of the Companies which are yet to commence operations and which have been liquidated or sold during the year are mentioned in "Form AOC-1", which is attached as an "Annexure VII." A statement containing the salient features of the financial statements of Subsidiaries, Associate Companies or Joint Ventures are mentioned specifically in the same annexure as mentioned above. In accordance with Section 136(1) of the Act, the financial statements of the subsidiaries companies are available on the Company's official website post approval of the members.

In line with Regulation 24 and Regulation 46(2)(h) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (hereinafter "the Listing Regulations") the Company has formulated a detailed policy for determining ‘material' subsidiaries and the said policy is available at the Company's official website and may be accessed at the link : https://coffeeday.com/Stakeholders/Policies/Material Subsidiary.pdf

Management Discussion & Analysis Report:

As stated in Regulation 34(2)(e) of the Listing Regulations, the Annual Report shall contain a detailed report on Management Discussion & Analysis, which is hereto attached with the Annual report in "Annexure-I."

Corporate Governance:

The report on Corporate Governance along with a Certificate from the Practicing Company Secretary regarding proper compliance of Corporate Governance pursuant to the requirements of Schedule V of the Listing Regulations forms an integral part of the Annual Report stated in "Annexure-II."

Dividend Distribution Policy:

In accordance with Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2016, the Board of the Company has adopted Dividend Distribution policy in their meeting held on 18th May, 2017, which aims at marking the right balance between the quantum of dividend paid to its shareholders and the amount of profit retained for its commercial requirements. The said policy is available in the website of the company and may be accessed at the link : https://coffeeday.com/Stakeholders/Policies/DDP-CDEL.pdf

Board Diversity:

The Company recognizes and embraces the importance of diverse Board in its success. We believe that a truly diverse board will leverage differences in thought, perspective, knowledge, industry experience that will help us retain our competitive strength. The Company has evaluated the policy with a purpose to ensure adequate diversity in Board of Directors, which enables them to function efficiently and foster differentiated thought processes at the back of varied industrial and management expertise. The Board recognises the importance of a diverse composition and has therefore adopted a Board Diversity Policy.

The policy is made available at the Company's official website via link: https://www.coffeeday.com /PDF/BOARD%20DIVERSITY%20POLICY.pdf

Board Evaluation and Policy on Directors' Appointment and Remuneration:

In accordance with Section 178(3) of the Companies Act, 2013, the Nomination and Remuneration Committee has specified the criteria and manner for effective evaluation of performance of ‘Board', its ‘Committees' and ‘Individual Directors' carried out either by the Board, by the Nomination and Remuneration Committee or by an independent external agency and reviewed its implementation and compliance.

The detailed policy in compliance with Section 178(3) of the Act read along with Regulation 19 of the Listing Regulations has been approved by the Board of Directors of the Company and is made accessible at the Company's official website at the following link: https://www.coffeedav.com/PDF/NOMINATION%20&%20REMUNERATION%2QPOLICY.pdf

As per the provisions of the Companies Act 2013 an evaluation of the performance of the Board, Committee and members were undertaken.

The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of various criteria such as Board structure, strategic discussions, effective reviews, process, Boards engagement with senior management team etc. The performance of the Committee was evaluated by the Board on the basis of composition, effective discharge of its function and recommendations provided. Performance of the Individual Directors was evaluated on the basis of Integrity, Commitment, ability to exercise independent judgment etc. The feedback was collated and discussed at the Board and action points for improvement were put in place.

Appointment/ Resignation/ Re-appointment of Board of Directors:

During the period under review, there is no change in constitution of the Board since last report.

Dr. I. R. Ravish shall retire by rotation at the ensuing Annual General meeting and is eligible for re-appointment.

Significant Development during the year and update on action taken on recovery of amount due by MACEL to subsidiaries of the Company as per SEBI order dated 24th January 2023

The Company, received Order from SEBI dated 24th January 2023, directing the Company to take all the necessary steps for recovery of dues from MACEL and its related entities along with due interest, that are outstanding to the subsidiaries of CDEL. Further, as per the order of SEBI the Company on 3rd April 2023 appointed an Crest Law Partners (Independent Law firm) in consultation with NSE to take effective steps for recovery of dues.

The SEBI had also imposed a penalty of Rs. 25 Cores under section 15HA and Rs. 1 crore under section 15HB of the SEBI Act, 1992. However, the company appealed the said order before the Hon'ble Securities Appellate Tribunal (SAT) asking for stay on the order. The SAT granted stay on imposition of penalty.

Thereafter, under the guidance and supervision of CrestLaw Partners, with the prior approval of NSE and with the consent/acceptance of all the parties to the dispute, it was decided to resolve the dispute through Arbitral proceedings under the Arbitration and Conciliation Act, 1996 for recovery of money from MACEL and other related entities.

Further, all the parties to the dispute approved for appointment of Hon'ble Justice Sri Ajit J. Gunjal, Former Judge, High Court of Karnataka as the Sole Arbitrator in respect of SEBI's Order dated 24th January 2023.

Thereafter the Arbitral Tribunal fixed a timeline for completion of pleadings in the arbitration for the recovery of money from MACEL and other entities. CrestLaw Partners prepared the Statement of Claims and filed the same before the Arbitral Tribunal on 30th January 2024. Thereafter the respondents filed their respective Statement of Defence before the Arbitral Tribunal on 02nd July 2024. The process of Arbitration is in progress.

Director's Responsibility Statement:

In Compliance with section 134(5) of the Companies Act, 2013, the Board of Directors hereby confirms the following:

• In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to departures;

• The Directors had selected such accounting policies and applied them consistently with proper explanation relating to departures and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

• The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

• The Directors had prepared the annual accounts on a going concern basis; and

• The Directors are responsible for establishing and maintain adequate and effective internal financial controls with regard to it business operations and in the preparation and presentation of the financial statements, in particular, the assertions on the internal financial controls in accordance with broader criteria established by the Company. Towards the above objective, the directors have laid down the internal controls based on the internal controls framework established by the Company, which in all material respects were operating effectively as at March 31, 2024.

• The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate. The Company has substantially complied with material provisions of such acts and regulations as are relevant for its operations.

Declaration by Independent Directors:

All the Independent Directors have given their declarations stating that they meet the criteria of independence as laid down under Section 149(6) of the Act read with Regulation 16(1)(b) of the Listing Regulations. In the opinion of the Board, they fulfil the conditions of independence as specified in the Act and the Listing Regulations and are independent of the management.

Committees of the Board:

The Company has five Committees of the Board i.e.:

(a.) Audit Committee

(b.) Nomination and Remuneration Committee and

(c.) Stakeholder's Relationship Committee

(d.) Corporate Social Responsibility Committee

(e.) Risk Management Committee

The detailed information on each of these committees including its composition, functioning and number of meetings are disclosed in the Corporate Governance report annexed with the Annual report of the Company.

Meetings of the Board:

During the financial year 2023-24, the meetings of the Board of Directors were held seven (7) times. Details of these meetings and other Committee/General meetings are given in the report on Corporate Governance Report attached with the Annual report.

Particulars of Contracts/arrangements with related parties:

All the repetitive Related Party Transactions that were entered into during the FY 2023-24 were on an arm's length basis and in the ordinary course of business. There were no materially significant Related Party Transactions made by the Company during the year that required shareholders' approval under Regulation 23 of the Listing Regulations. Prior omnibus approval from the Audit Committee is obtained for transactions which are repetitive in nature. Further, disclosures are made to the Committee on a quarterly basis.

Further, Particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the Form AOC-2 have been enclosed as Annexure-VIII pursuant to clause (h) of subsection (3) of Section 134 of Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules 2014.

The Company has adopted a Policy for dealing with Related Party Transactions and is made available on the Company's official website via web link: https://www.coffeeday.com/PDF/RPT%20POLICY.pdf

Material changes and commitment - if any, affecting the financial position of the Company from the end of the financial year till the date of this Report:

There has been no material change and commitment, affecting the financial performance of the Company which has occurred from the end of the financial year of the Company to which the financial statements relate to till the date of this report.

Change in nature of business:

There has been no change in the nature of business of the Company.

Conservation of Energy, Research and Development, Technology absorption, Foreign Exchange Earnings & Outgo:

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3) (m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 is provided in "Annexure-III" to this Annual report.

AUDITORS:

a) Statutory Auditors:

Members of the Company have appointed M/s. Venkatesh & Co., Chartered Accountants, as Statutory Auditors of the company for the period of 5 years from the Conclusion of 12th Annual General Meeting till the conclusion of 17th Annual General Meeting which will fall in the year 2025 in their 12th Annual General Meeting held on 31st December 2020.

b) Secretarial Auditor:

In accordance with Section 204 of the Act and the rules made there under, the Company has appointed M/s G. Akshay & Associates, Practising Company Secretaries, Bangalore to undertake the Secretarial Audit of the Company for the financial year ended 31st March, 2024. The Secretarial Audit report issued in this regard is attached as "Annexure-IV" (including Secretarial Audit Reports of material subsidiaries i.e Coffee Day Global Limited (CDGL), Coffee Day Trading Limited(CDTL) and Tanglin Developments Limited (TDL)).

c) Cost Auditor:

In terms of the provisions of Section 148 of the Act, the appointment of the Cost Auditors does not apply to the Company.

d) Internal Auditor:

Pursuant to the provisions of Section 138 of the Act read with the Companies (Accounts) Rules, 2014, the Company has appointed M/s A B S & Co., Chartered Accountants as Internal Auditors of the Company.

Significant and material orders passed by the Courts/Regulators:

During the year under report there were no significant and material orders passed/notices served by Courts/Regulators except the following:

1. The SEBI issued the SCN dated October 16, 2023 under Section 23A(a) of the SCRA read with Rule 4 of SEBI (Procedure for holding Inquiry and Imposing Penalties) Rules, 1995 in the matter of Coffee Day Enterprises Limited for alleged violation of SEBI (LODR) Regulations in connection with alleged non-disclosure of the fraud categorization of CDGL, by Lakshmi Vilas Bank(LVB). It is alleged that the Company has violated the provisions of Regulation 30(1) read with Regulation 30(2) and Regulation 30(9) and read with Clause 6 Para A of Part A of Schedule III of SEBI LODR Regulations. However, the Fraud categorization done by the LVB is incorrect as the CDGL was never a party to the LVB Transaction. Further, the Company had applied for settlement of this matter and the same was settled by paying penalty of Rs.7,52,400/-.

2. An application has been filed against the Company under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy Rules, 2019 by IDBI Trusteeship Services Limited before the National Company Law Tribunal, Bengaluru for alleged default of Rs.228,45,74,180/-. On 8th August 2024 the NCLT Bengaluru admitted the petition filed by IDBI under Section of Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process (CIRP). The Company appealed against the Order in NCLAT Chennai and on 14th August 2024, the NCLAT pronounced "the effect and operation of the impugned order of NCLT Bangalore under section 7 of CIRP has been kept in abeyance, till the next date of listing". The Company will do all acts required to safeguard the interest of all shareholders.

Extract of Annual Return:

An extract of the Annual return in form MGT-9 in compliance with Section 92 of the Companies Act, 2013 read with applicable rules made thereunder is annexed as "Annexure-V" and is placed on the website www.coffeeday.com

Business Responsibility & Sustainability Report:

The Regulation 34(2)(f) of the Listing Regulations, which pertains to report on Business Responsibility & Sustainability is not applicable to current reporting period, as the Company is not under top one thousand companies based on market capitalization as on 31st March 2024.(Under BSE and NSE, the Company stands on 1222 and 1174 ranks respectively)

Secretarial Standards:

The Company complies with all Secretarial Standards issued by Institute of Company Secretaries of India.

Internal Financial Control (IFC) and its Adequacy:

The Internal Financial Controls of the Company operate through well documented standard policies and guidelines. The Company has adequate internal financial control procedures commensurate with its size and nature of business, which helps in ensuring orderly and efficient conduct of its business. This system provide a reasonable assurance of financial and operational information, complying with applicable statutes, safeguarding of assets of the Company, prevention and detection of frauds, accuracy and completeness of accounting records and ensuring compliance with corporate policies.

Exceptions if any are reported under "Explanatory Notes of Management" for each financial quarter.

All the significant internal audit observations and management actions thereon are reported to Audit Committee on a quarterly basis. The Audit Committee reviews the operations and assesses the adequacy of the actions proposed as well as monitors their implementation. The internal auditors conduct a quarterly follow-up for implementation of all audit recommendations and the status report is presented to the Audit Committee regularly.

The Company's management has assessed the effectiveness of the internal control over financial reporting for the year ended 31st March, 2024 and based on the assessment; believe that the system is working effectively subject to statutory auditors observations.

Whistle Blower Policy/Vigil Mechanism:

As per the requirements laid down under Section 177(9) of the Act and Regulation 22 of the Listing Regulations, the Company has established the Whistle blower Policy which encourages Directors and employees to bring to the Company's attention, instances of unethical behaviour, actual or suspected incidents of fraud or violation of the Company's Code of Conduct that could adversely impact on Company's operations and business. The Policy provides that the Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. The practice of the Whistle blower Policy is overseen by the Audit Committee and no employee has been denied access to the Committee.

The Contact details of Chairman of Audit committee as under:

Name: Mr. K. R. Mohan

43 New No.22, 3rd Floor 16th Cross,

8th Main, Malleswaram Bangalore

Karnataka 560055

Cell No.: 9844152676

Email id:kr_mohan@hotmail.com

The Whistle Blower Policy is available on the Company's official website and may be accessed through web link: https://coffeeday.com/PDF/WhistleBlower.pdf

Particulars of Employees:

As stated in provisions of Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended from time to time, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules which includes the name of top 10 employees in terms of remuneration, forms part of this annual report. Pursuant to the provisions of Section 136(1) of the Act, the Board report is being sent to the shareholders including the said statement.

Disclosure pertaining to the remuneration as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in "Annexure-VI".

Corporate Social Responsibility (CSR):

Pursuant to the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, and on the recommendations of the CSR Committee comprising of Mr. S.V. Ranganath as the Chairman and Mrs. Malavika Hegde and Mr. K.R. Mohan as Members, the CSR policy is adopted and approved by the Board of the Company. The said policy has been hosted on the Company's website and is available on the link: https://coffeeday.com/ Stakeholders/Policies /CSR-Policy-CDEL.pdf it lays down the purpose of formulation of the policy, areas of focus, composition of Committee and CSR budget.

During the year under Report, the Company is not required to spend any amount on CSR activities.

Green Initiatives:

In commitment to keep in line with the Green Initiative and going beyond to it, electronic copy of the Notice of 16th Annual General Meeting along with Annual Report of the Company are sent to all Members whose email addresses are registered with the Company/Depository Participant(s).

Prohibition and Redressal of Sexual Harassment at Work place:

The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules made thereunder. The Policy aims to promote a healthy work environment and to provide protection to employees at workplace and redress complaints of sexual harassment and related matters thereto. The Company has also constituted an Internal Complaints Committee, known as the Prevention of Sexual Harassment (POSH) Committee, to enquire into complaints of sexual harassment and recommend appropriate action.

Following are the Internal Complaints Committee members.

1. Ms. Bhavna Halappa - Presiding Officer

2. Ms. Arundhati Mukoo - Internal member

3. Mrs. G. Vanajakshi N - External Member

The details of the sexual harassment complaints received and redressed during the year are as follows:

Opening Complaints filed Complaints disposed Pending
Nil Nil Nil Nil

BOARD'S RESPONSE ON AUDITORS' QUALIFICATION, RESERVATION OR ADVERSE REMARK OR DISCLAIMER MADE:

A. Statutory Audit Qualification

I. Following are the Disclaimers/Emphasis of matter/qualifications given in the Consolidated Independent Auditors Report for the year ended 31st March 2024 and management response for the same.

1. Default in debt and breach in debt covenants, Non-Compliance with debt covenants and No Confirmation of Balance for Borrowings

In respect of parent company and some of the subsidiaries, attention is drawn to Note 23, Note 23A, Note 29 and Note 56 of the Consolidated financial statements, wherein instances of non-compliance with certain debt covenants including interest & principal repayment defaults have been described. We also draw attention to the fact that the Company has not obtained the balance confirmations on loans from lenders. In the absence of adequate and sufficient audit evidence to establish the amounts payable to the lenders, we are unable to provide our opinion on the correctness of these amounts reflected in the consolidated financial statements and also on their consequential impact including potential tax liabilities. We have been informed that during the year certain lenders have exercised their right to recall the loan and some lenders have initiated legal action to recover dues. However, in the absence of the adequate evidence, we are unable to comment on the consequential adjustments that might impact the Consolidated Financial Statements on account of non-compliance with debt covenants.

Further, in view of the loan recall notices, legal disputes and pending one-time settlement with the lenders of the group, the parent company, one subsidiary and one step down subsidiary have not recognised interest on the loans outstanding as of March 31, 2024 aggregated to INR 115.7 Crores. As the loan recall letters provided by the lenders requires payment of interest, penal interest, non-provision of such interest is not in line with the accrual concept of accounting.

Further, we have issued a disclaimer of opinion due to non-provision of interest in the parent company, 1 subsidiary and 1 step down subsidiary.

Further we are unable to draw an opinion due to matters stated in Note 61 of the Consolidated Financial Statements which refers to non-availability of appropriate evidence, confirmation of balances and statement of accounts with regard to borrowings from certain lenders in 1 subsidiary and 1 stepdown subsidiary.

Management response: The Group has borrowings amounting to Rs.1,289 crores as at 31 March 2024. There have been certain covenant breaches with respect to certain borrowings taken by the group from various lenders. Such breaches entitle the lenders to recall the loan. There have been certain defaults in repayments of principal and interest of the loans and certain lenders have exercised their rights including recall the loans. In view of the loan recall notices, legal disputes and pending onetime settlement with the lenders of the Group, the Group has not recognized interest.

2. Dues from related parties

Attention is drawn to Note 68 of the Consolidated Financial Statements wherein a final adjudication order dated 24.01.2023 has been served on the company under section 11 (11(4), 11(4A), 11B and 11B (of the Securities and Exchange Board of India Act, 1992 read with Rule 5 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 by SEBI imposed with a total monetary penalty of Rs.26,00,00,000 (Rupees Twenty-Six Crore) under Section 15HA and Section 15HB of the SEBI Act, 1992 respectively on account of violations of provisions of Section 12A(a), (b) & (c) of the SEBI Act, 1992 read with Regulations 3(b), (c) & (d) and 4(1) of the PFUTP Regulations as stated in Para 59 and 60 of its order relating to the advances to MACEL by the subsidiaries of the Company and in respect of which no provision for the liability has been considered in the accounts.

The order further directed the company to appoint a law firm, of standing and repute, within 60 days of the order to take all necessary steps for recovery of entire dues from MACEL and its related entities, along with due interest, that are outstanding to the subsidiaries. SEBI further directed the company to file a quarterly report with NSE/CDEL Board, detailing the progress in the recovery process.

The company appealed against the above order dated 24th January 2023 to the Hon'ble Securities Appellate Tribunal (SAT) which granted stay only on the imposition of penalty.

As per the order of SEBI, the Company has appointed an independent law firm Crest Law on 3rd April 2023 to take effective steps for recovery of dues from MACEL.

Further, we have issued a disclaimer of opinion due to the possible impact of the recoverability of dues from MACEL in 3 subsidiaries, 1 step-down subsidiary based on above.

Further, the auditor of 1 subsidiary has issued a disclaimer of opinion due to the possible impact of the recoverability of dues based on their review.

Hence we are unable to comment on the recoverability of amount due from MACEL amounting to Rs.3,372.83 Crores to the group as a whole.

Management response: The company appealed the above order dated 24th January 2023 to the Hon'ble Securities Appellate Tribunal (SAT). However, the SAT granted stay on imposition of penalty. As per the instructions of NSE the Company appointed Independent Law Firm Crest Law on 3rd April 2023 to take effective steps for recovery of dues from MACEL. Company has initiated arbitration proceedings against MACEL as suggested by Crest Law in consultation with NSE. In this regard the subsidiaries of the company have filed claim statement as part of arbitration proceedings. Under the above circumstances, no provision is made in the books of accounts against the amount receivable from MACEL. As on 31.03.2024 the amount due by MACEL to various subsidiaries and joint venture of the company amounts Rs.3,372.83 crores.

3. Material uncertainty relating to going concern

The Consolidated Financial Statements of the Group have been prepared by the Management and Board of Directors using the going concern assumption. The matters detailed in the above paragraphs may have a consequential implication on the Group's ability to continue as a going concern (refer to Note 57 of the Consolidated financial Statements). Further, the material uncertainty over using the Going Concern assumption has also been established by several other component auditors of the Group, as well. However, the Group is confident of meeting its obligations in the normal course of business and accordingly the accounts of the Group have been prepared on a Going Concern Basis.

Further, We have expressed that there is a material uncertainty on going concern in 2 subsidiary, 3 step down subsidiaries and the auditors of 1 Subsidiary and 2 Step down subsidiaries have also expressed the same in their reports.

Management response: These consolidated financial statements for the quarter and year ended 31 March 2024 have been prepared on a going concern basis in view of the positive net worth of the Group amounting to Rs. 3,130 crores as of 31 March 2024.

Emphasis of Matter:

4. Change in shareholding pattern

It is observed that there has been a change in the percentage of shares held by the Parent Company in two of its subsidiaries as of March 31, 2024 vis-a-vis March 31, 2019, due to the invocation of shares by the lenders of the subsidiaries. However, while considering the amount invested in the subsidiaries, the Management of the Company has considered the erstwhile shareholding pattern prior to dilution as the Management believes that the change in shareholding is temporary in nature and the shares pledged will be redeemed back by the Company (refer to Note 59 of the Consolidated Financial Statements).

However, these shares have been transferred to such lenders before March 31, 2024. We have been informed that the lenders have not sold any of the shares invoked and consequently have not made any adjustments to the loan outstanding. Accordingly, the Management believes that it is not possible to attribute any sale value to the invoked shares. Consequently, the impact of the said transfer on the book value of invoked shares on the statements cannot be ascertained. Further, the impact of the aforesaid on this Statement, including but not limited to the profit attributable to the non-controlling interest in the Company, cannot be ascertained. Accordingly, the level of compliance to the requirements of the Indian Accounting Standards cannot be ascertained by us.

Management response:

Change in the percentage of shares held by the Company in its two subsidiaries viz M/s TDL & M/s CDGL as of March 31, 2024 vis-a-vis March 31, 2019 due to invocation of shares pledged to the lenders of the subsidiaries. However, while considering the amount invested in the subsidiaries, Company has considered the erstwhile shareholding pattern prior to dilution as the Management believes that the change in shareholding is temporary in nature and the shares pledged will be released back to the Company. However, these shares have been transferred to such lenders before March 31, 2024. The lenders have not made any adjustments to the loan outstanding as the lenders have not realised any amount on invocation of these shares. Since the shares do not have any marketability it is not possible to attribute any value to the invoked shares.

In addition to the above the Supreme Court (SC) order, dated May 12, 2022 in a case between PTC India Financial Services and Venkateswarlu Kari has been cited that lenders or pledgees are not owners of shares and cannot exercise voting rights once the pledged shares are invoked and SC has observed that the invocation of pledge shares, lenders only become beneficial owners in depository records only to facilitate the sale of shares. The lender does not become the owner and cannot sell shares to itself as it is prohibited in law.

5. Outstanding income tax demand in relation to subsidiary

We draw attention in One subsidiary wherein (refer to Note 44 F of the Statement) the outstanding income tax dues of INR 119.51 crores relating to for AY 2019-20 and AY 2020-21.

Management response: Impact already considered in Financial statements, the auditors have emphasized a factual matter

6. Emphasis of matter - Cases filed against certain subsidiaries in NCLT

We draw attention to the details of cases filed against the 1 Subsidiary before NCLT (refer Note 45 of the Statement) which was subsequently dismissed.

Management response: The National Company Law Tribunal (NCLT) had dismissed the application by one of the lenders of Coffee Day Global Limited (subsidiary) as a financial creditor for recovery of its dues in the previous quarter. The lender filed an application in NCLAT, appealing against the order.

7. Sale of immovable property and accordingly the profit on sale

We draw attention to Sale of immovable property and accordingly the profit on sale of such asset has been recognised under other income (refer Note 63 and 64 of the Financial Statement) in 2 subsidiaries.

Management response: Impact already considered in Financial statements, the auditors have emphasized a factual matter

8. Sale of immovable property and recovery by lenders

We draw attention to Note 5(iv) of the Consolidated Financial Statements wherein it is mentioned that the company on 15 Sep 2023, has sold its Mangalore property which was pledged to Rare Asset Reconstruction Limited (i.e the lender of Coffee Day Enterprises Limited) and proceeds were used to repay Rare Asset Reconstruction Limited dues to the extent of Rs.734 Lakhs.

Management response: The auditor has emphasized a factual matter for which the impact has been addressed in financials

9. Obsolete or unusable assets pertaining to closed cafes

We have emphasized on the obsolete or unusable assets pertaining to closed cafes and fully depreciated such assets to the tune of Rs.2.23 Crores in 1 subsidiary (refer Note 4(iv) of Consolidated Financial Statements).

Management response: The auditor has emphasized a factual matter for which the impact has been addressed in financials.

10. Impairment of goodwill

The Company has impaired the goodwill relating to investment in two subsidiaries(Refer Note 6 of the Consolidated Financial Statements) viz Coffee Day Global Limited and Coffee Day Hotels and Resorts Private Limited of Rs.319.16 crores and Rs.40.21 crores respectively during the year.

Management response: The auditor has emphasized a factual matter for which the impact has been addressed in financials.

11. Emphasis of matter -Recoverability of Capital Advances to the related parties:

We have further emphasized in one subsidiary, there are doubts on the recoverability of dues from capital advances to one related party aggregating to INR 275 Crore (refer to Note 13 of the Consolidated Financial Statements).

Management response:

An agreement for purchase of land at Mumbai had been entered into by the Tanglin Developments Limited (subsidiary) with Mrs. Vasanthi Hegde in FY 2017-18. Based on agreement to purchase the land the Tanglin Developments Limited (subsidiary) has advanced Rs. 27,500 Lakhs to Mrs.Vasanthi Hegde. The land in the name of Mrs.Vasanthi Hegde has been acquired by City & Industrial Development Corporation (CIDCO) nodal agency for acquiring land for Navi Mumbai International Airport. CIDCO has proposed alternative land in lieu of the acquisition of land. However Mrs.Vasanthi Hegde has filed legal case for monetary compensation instead of alternate land.

12. Global Village sale-Second tranche sale and its relevant expenses

We draw attention to Note 8B of the Consolidated Financial Statements, wherein in one of the subsidiaries that it has received its second tranche sale proceeds of Rs.349 crores post deductions of certain expenses incurred by GV Tech Parks Private Limited on behalf of Tanglin Developments Limited (subsidiary) and for non satisfaction of certain CP's as agreed in the investment agreement and an amount of Rs. 45.22 crores is shown as expense under exceptional items

Management response: The auditor has emphasized a factual matter for which the impact has been addressed in financials.

13. Discharge of corporate guarantee liability

We draw attention to Note 66, wherein in one of the subsidiaries that it has paid Rs.93 crores for its corporate guarantee liability as full and final settlement as agreed in the settlement agreement entered with the lenders of Coffee Day Global Limited and Sical Logistics Limited. Of the above Rs 93 crores, an amount of Rs 50 crores was paid for Sical Logistics Limited and Rs 43 crores was paid for Coffee Day Global Limited, towards corporate guarantee obligation. Sical Logistics Limited's resolution process is completed and no amount is recoverable and same is shown as expense under exceptional items. In the case of corporate guarantee given to one subsidiary Rs.43 crores is a receivable item.

Management response: The auditor has emphasized a factual matter for which the impact has been addressed in financials.

14. Sale of shares by lender and loss on sale

We draw attention to Note 65, which relates to sale of shares detailing facts relating to the sale of shares held by the company in Coffee Day Global Limited given as security to RBL Bank limited for loan availed by M/s.Sical Logistics limited, an erstwhile subsidiary of the company. During the year, RBL bank limited has sold the above security given by the company and adjusted the proceeds against the dues of M/s Sical Logistics Limited and company has recognized a loss of Rs.24.00 crores from the above sale transaction as an exceptional item.

Management response: The auditor has emphasized a factual matter for which the impact has been addressed in financials.

15. Emphasis of matter - profit of on sale of the building & transfer of lease hold rights of the land

We draw attention to Note 47 of the Consolidated Financial Statements, wherein one of the subsidiaries has sold its corporate building for a sum of Rs.149.76 crores vide registered sale deed in November 2023. The share of profit of on sale of the building & transfer of lease hold rights of the land for the company amounted to Rs.55.80 crores during the year. A sum of Rs.16.89 crores is yet to be received out of the total consideration stated in the registered sale deed and the same is disclosed under Other Current financial assets. Further no confirmation of balance has been received from this party. It is stated that the parties are renegotiating the commercials, according to which the leasehold rights of the Annexe building will be transferred to a third party and the consideration agreed in the registered transfer deed will stand reduced by Rs 11.29 crores for the reasons detailed in the proposed rectification deed. Consequently, in the event of the rectification going through the gain recognized will be lower to the extent of Rs. 11.29 crores and the lease hold rights of the Annexe building will be restored to the company.

Management response: The auditor has emphasized a factual matter for which the impact has been addressed in financials.

16. Reclassification of assets held for sale

We have drawn attention is drawn to Note 47 of the Consolidated Financial Statements, wherein one subsidiary company has reclassified a sum of Rs.20.21 crores which was considered as Asset Held for Sale to Property plan and equipment on account of de-recognition in compliance with IND AS. Management response: The auditor has emphasized a factual matter for which the impact has been addressed in financials.

17. Outstanding income tax demand in one subsidiary

We draw attention to Note 63 of the Consolidated Financial Statements wherein The Auditor of a firm in which one subsidiary is a major partner, has drawn attention to the point on non- payment of income tax as per books to the extent of Rs.4.30 crores (excluding interest and penalty)

Management response: The auditor has emphasized a factual matter for which the impact has been addressed in financials.

18. Sale of resort business to wholly owned subsidiary

We draw attention to Note 62 of the Consolidated Financial Statements, wherein the Board of Directors of CDEL provided an approval to enter into non binding MOU Dated 26 April 2023, with AC & C Resorts LLP incorporated on 13 April 2023 (99.99% subsidiary if CDHRPL) to sell the resorts business, held by CDHRPL (Chikmagalaru resort) and Karnataka Wildlife Resorts Private Limited (Bandipur resorts) to its subsidiary AC&C. Subsequently, on 27 April 2023, Coffee Day Hotels & Resorts Private Limited and Karnataka Wildlife Resorts Private Limited have entered into non binding MOU to sell its resorts business to AC&C, subject to final due diligence. Company has gave approval to sell Chikmagaluru resort to AC&C vide its Board meeting dated 30.05.2023. CDHRPL has transferred their resorts business along with all the assets and liabilities vide BTA dated 1 July 2023 executed between CDHRPL and AC&C for a consideration of Rs.35.91 crores. In AC & C, Chaitra Civil Ventures LLP (CCV) has invested Rupees 36 crores, for Profit Sharing Ratio of 37.57% AC&C. Post the investment Profit Sharing Ratio of CDHRPL will be 62.43%.

Management response: The auditor has emphasized a factual matter for which the impact has been addressed in financials

II. Following are the Disclaimers/Emphasis of matter/qualifications given in the Standalone Independent Auditors Report for the year ended 31st March 2024 and management response for the same.

1. Recoverability of dues from Group Companies

We have not been provided with sufficient evidence with respect to recoverability of dues from group companies amounting to INR 1,619 Crores (refer Note 7B of the standalone financial statement). We are therefore unable to comment on the recoverability of the stated balance from group companies and the impact on the standalone financial statement.

Management response: The subsidiaries of CDEL are in the process of disinvestment of their assets. The company is confident that the subsidiaries will repay these advances in due course.

2. Default in repayment of debt and interest due, Non -Compliance with debt Covenants and No Confirmation of balances for Borrowings

Attention is drawn to Note 14 of the standalone financial statement, wherein instances of noncompliance with certain debt covenants including interest & principal repayment defaults have been described. We also draw attention to the fact that the Company has not obtained the balance confirmations on loans from lenders. In the absence of adequate and sufficient audit evidence to establish the amounts payable to the lenders, we are unable to provide our opinion on the correctness of these amounts reflected in the standalone financial statement and also on their consequential impact including potential tax liabilities. We have been informed that during the year certain lenders have exercised their right to recall the loan and some lenders have initiated legal action to recover dues. However, in the absence of the adequate evidence, we are unable to comment on the consequential adjustments that might impact this Statement on account of non-compliance with debt covenants.

Further, in view of the loan recall notices, legal disputes and pending one-time settlement with the lenders of the Company, the Management has not recognised interest on the loans outstanding as of March 31, 2024 aggregated to INR 54.32 Crores as detailed in Note 14 of the statement. As the loan recall letters provided by the lenders requires payment of interest and penal interest, non-provision of such interest is not in line with the accrual concept of accounting.

Management response: Due to default in repayment of interest and principal to the lenders, the lenders have sent "loan recall" notices to the Company as well as initiated legal disputes. In view of the loan recall notices, legal disputes and pending onetime settlement with the lenders, company has not recognized interest of Rs.54.32 crores during the financial year.

Management is following up with lenders to get the balance confirmations. This will be taken care of during one time settlement process. There have been certain covenant breaches with respect to borrowings taken by the Company from various lenders. Such covenant breaches entitle the lenders to recall the loan. Some of the lenders have exercised their right to recall the loan and one of the lenders has filed an application with NCLT, Bangalore for recovery of its dues, on 7 September 2023.

3. Going Concern Assumption

The Standalone Financial Statements has been prepared by the Management and Board of Directors using the going concern assumption (Refer Note 38 of the standalone financial statement). The matters detailed in the above paragraphs may have a consequential implication on the Company's ability to continue as a going concern. We are therefore unable to comment on whether the going concern basis for preparation of the standalone financial statement is appropriate.

Management response: These standalone financial statements for the year ended 31 March 2024 have been prepared on a going concern basis in view of the positive net worth of the Company amounting to Rs.18,594 million as of 31 March 2024.

Emphasis of matter:

4. SEBI Order dated 24.01.2023

Attention is drawn to Note 40 of this statement wherein a final adjudication order dated 24.01.2024 has been served on the company under section 11 (11(4), 11(4A), 11B and 11B (of the Securities and Exchange Board of India Act, 1992 read with Rule 5 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 by SEBI imposed with a total monetary penalty of Rs.26,00,00,000 (Rupees Twenty-Six Crore) under Section 15HA and Section 15HB of the SEBI Act, 1992 respectively on account of violations of provisions of Section 12A(a), (b) & (c) of the SEBI Act, 1992 read with Regulations 3(b), (c) & (d) and 4(1) of the PFUTP Regulations as stated in Para 59 and 60 of its order relating to the advances to MACEL by the subsidiaries of the Company and in respect of which no provision for the liability has been considered in the accounts.

The order further directed the company to appoint a law firm, of standing and repute, within 60 days of the order to take all necessary steps for recovery of entire dues from MACEL and its related entities, along with due interest, that are outstanding to the subsidiaries. SEBI further directed the company to file a quarterly report with NSE/CDEL Board, detailing the progress in the recovery process.

The tenure of the law firm appointed in terms of sub-para (b) above shall be until the lapse of three months from the date of conclusion of three annual general meetings of CDEL, held after passing of this order or till the dues are recovered, whichever is earlier.

The company appealed against the above order dated 24th January 2023 to the Hon'ble Securities Appellate Tribunal (SAT) which granted stay only on the imposition of penalty.

Management response:

The auditors has emphasized a factual matter which does not require any accounting adjustments.

5. Impairment of investments

We draw attention to Note 6 of the Standalone Financial Statements wherein the Management of the Company has determined the fair value of its investments in subsidiaries, and has recognized impairment on two of its subsidiaries to the extent of 1,182 crores.

Management response: The auditors have emphasized a factual matter for which the impact has been addressed in the standalone Financial statements.

6. Change in shareholding in subsidiaries

It is observed that there has been a change in the percentage of shares held by the Company in two of its subsidiaries as of March 31, 2024 vis-a-vis March 31, 2019, due to the invocation of shares by the lenders of the subsidiaries. However, while considering the amount invested in the subsidiaries, the Management of the Company has considered the erstwhile shareholding pattern prior to dilution as the Management believes that the change in shareholding is temporary in nature and the shares pledged will be redeemed back by the Company (refer to Note 6 of the standalone financial statements).

However, these shares have been transferred to such lenders before March 31, 2024. We have been informed that the lenders have not sold any of the shares invoked and consequently have not made any adjustments to the loan outstanding. Accordingly, the Management believes that it is not possible to attribute any sale value to the invoked shares. Consequently, the impact of the said transfer on the book value of invoked shares on the standalone financial statements cannot be ascertained.

Management response:

Change in the percentage of shares held by the Company in its two subsidiaries viz M/s TDL & M/s CDGL as of March 31, 2024 vis-a-vis March 31, 2019 due to invocation of shares pledged to the lenders of the subsidiaries. However, while considering the amount invested in the subsidiaries, Company has considered the erstwhile shareholding pattern prior to dilution as the Management believes that the change in shareholding is temporary in nature and the shares pledged will be released back to the Company. However, these shares have been transferred to such lenders before March 31, 2024. The lenders have not made any adjustments to the loan outstanding as the lenders have not realised any amount on invocation of these shares. Since the shares are not listed it is not possible to attribute any value to the invoked shares.

In addition to the above the Supreme Court (SC) order, dated May 12, 2022 in a case between PTC India Financial Services and Venkateswarlu Kari has been cited that lenders or pledgees are not owners of shares and cannot exercise voting rights once the pledged shares are invoked and SC has observed that the invocation of pledge shares, lenders only become beneficial owners in depository records only to facilitate the sale of shares. The lender does not become the owner and cannot sell shares to itself as it is prohibited in law. Management believes that the change in shareholding is temporary in nature and the shares pledged will be released back to the Company. Since there is no marketability for the shares invoked management is unable to estimate the impact.

7. Loss on sale of shares by lender invoking the pledge

We draw attention to Note 28 of the Standalone Financial Statements, detailing facts relating to the sale of shares held by the company in Coffee Day Global Limited given as security to RBL Bank limited for loan availed by M/s.Sical Logistics limited, an erstwhile subsidiary of the company. During the year, RBL bank limited has sold the above security given by the company and adjusted the proceeds against the dues of M/s Sical Logistics Limited and company has recognized a loss of Rs.24.00 crores from the above sale transaction as an exceptional item in the statement of profit and loss.

Management response: The auditors has emphasized a factual matter which does not require any accounting adjustments.

8. Amount receivable from sale of Way2Wealth

We draw attention to Note 10 of the standalone financial statement, detailing facts relating to the sale of Way2Wealth Securities Private Limited and its certain subsidiaries. Based on the sale agreement, Rs. 4.63 Crore is receivable by the company in form of preceding year's tax refunds and SEBI deposits from the purchaser (Shriram Ownership Trust) in form of reimbursement, subject to realisation. Further a sum of Rs. 0.77 Crore has been withheld by the purchaser per the agreement.

Management response: The auditors has emphasized a factual matter. The above are as per agreement with the party.

B. Secretarial Audit Qualification

As per the Regulation 29 of SEBI (LODR), the listed entity shall give prior intimation of at least 5 days in advance to stock exchange about the meeting of the board of directors in which financial results viz. quarterly, half yearly, or annual, as the case may be; is due to be considered.

However, the Company has given prior intimation on 10.08.2023 for the board meeting held on 14.08.2023, which is less than 5 days.

Management response:

Due to unavoidable circumstances the Company could not give prior intimation. The Company has taken the note of the same.

Risk Management and Assessment:

The Company is exposed to various risks considering the diversified parameters according to the different major business sectors of the Company that is coffee business, and resort business. The Audit Committee oversees the area of financial risks and controls. Major risks identified by the business and functions are systematically addressed through mitigating actions on continuing basis. The Company has incorporated sustainability in the process, which helps the Board to align potential exposures with the risk appetite and highlight risks associated with chosen strategies.

Details in respect of frauds reported by Auditors under Section 143(12):

There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and/or Board under Section 143(12) of the Act and the rules made thereunder.

Statutory Disclosures:

None of the Directors of your Company are disqualified as per provisions of Section 164(2) of the Companies Act, 2013. Your Directors have made necessary disclosures, as required under various provisions of the Act and SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015.

General Disclosures:

a) Buy back of securities:

In accordance with Section 68 of the Act, the Company has not bought back any of its securities during the year.

b) Sweat Equity:

The Company has not issued any Sweat Equity Shares under the provisions of Section 54 of the Act.

c) Bonus Shares:

In terms of Section 63 of the Act, the Company had not issued Bonus Shares during the year under review.

d) Employee Stock Option Plan:

Pursuant to the provisions of Section 62 of the Act, the Company has not provided any Stock Option to the Employees of the Company.

Appreciation:

The Board acknowledges and places on record its' appreciation for the contributions and hard work of Chief Executive Officer, Chief Financial Officer, Company Secretary & Compliance officer and other Senior employees and their team specifically in the last 5 years for continued operations and effective interaction with all stakeholders and statutory agencies.

Acknowledgement:

The Directors would like to express their gratitude towards the Company's employees, customers, Banks and institutions, investors and academic partners for their continuous support. They also thank the concerned government departments and agencies for their co-operation. The Directors appreciate and value the contribution made by every member of the ‘Coffee Day' family.

For Coffee Day Enterprises Limited

Sd/- Sd/-
S.V. Ranganath Malavika Hegde
Interim-Chairman & Independent Director CEO & Whole-time Director
DIN: 00323799 DIN: 00136524
Place: Bangalore
Date: 14th August, 2024