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Hindustan Unilever Ltd.

BSE: 500696 | NSE: HINDUNILVR |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE030A01027 | SECTOR: Personal Care

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Annual Report

For Year :
2021 2019 2018 2017 2016 2015 2014 2013 2012

Auditor's Report

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

Opinion

We have audited the standalone financial statements of Hindustan Unilever Limited (the Company), which comprise the standalone balance sheet as at 31 March 2021, and the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone 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.

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 (Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2021, and profit and other 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 (SAs) specified under Section 143(10) of the Act. Our responsibilities under those SAs 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 together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, 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.

The key audit matter

How the matter was addressed in our audit

Therefore, there is a risk of revenue being overstated due

• Examining historical rebate accrual together with our

to fraud through manipulation of discounts and rebates

understanding of current year developments to form

accruals recognised, resulting from pressure the Company

an expectation of the rebate accrual as at year end and

may feel to achieve performance targets at the year end.

comparing this expectation against the actual rebate

We identified the evaluation of accrual for discounts and

accrual, completing further inquiries and obtaining

rebates as a key audit matter.

underlying documentation, on a sample basis, as appropriate. Further, we also performed retrospective review to evaluate the precision with which management makes estimates.

• Checking completeness and accuracy of the data used by the Company for accrual of discounts and rebates.

• Testing actualisation of estimated accruals on a sample basis.

• Testing a selection of rebate accruals recorded after 31 March 2021 and assessing whether the accrual is recorded in the correct period.

• Testing a selection of payments made after 31 March 2021 and where relevant, comparing the payment to the related rebate accrual.

• Critically assessing manual journal entries posted to revenue, on a sample basis, to identify unusual items and examining the underlying documentation.

Provisions and contingent liabilities relating to taxation, litigations and claims See note 20 and 23 to the standalone financial statements

The key audit matter

How the matter was addressed in our audit

The provisions and contingent liabilities relate to ongoing

Our audit procedures included:

litigations and claims with various authorities and third parties. These relate to direct tax, indirect tax, transfer pricing arrangements, claims, general legal proceedings,

• Understanding the process followed by the Company for assessment and determination of the amount of

environmental issues and other eventualities arising in the

provisions and contingent liabilities relating to taxation,

regular course of business.

litigations and claims.

As at the year ended 31 March 2021, the amounts involved

• Evaluating the design and implementation and testing

are significant. The computation of a provision or contingent

operating effectiveness of key internal controls around

liability requires significant judgement by the Company

the recognition and measurement of provisions and re-

because of the inherent complexity in estimating future

assessment of contingent liabilities.

costs. The amount recognised as a provision is the best estimate of the expenditure. The provisions and contingent

• Involving our tax professionals with specialised skills

liabilities are subject to changes in the outcomes of

and knowledge to assist in the assessment of the value

litigations and claims and the positions taken by the

of significant provisions and contingent liabilities

Company. It involves significant judgement and estimation

relating to taxation matter, on sample basis, in light of

to determine the likelihood and timing of the cash outflows

the nature of the exposures, applicable regulations and

and interpretations of the legal aspects, tax legislations and

related correspondence with the authorities.

judgements previously made by authorities.

• Inquiring the status in respect of significant provisions and contingent liabilities with the Company''s internal tax and legal team, including challenging the assumptions and critical judgements made by the Company which impacted the computation of the provisions and inspecting the computation.

Revenue recognition - Discounts and rebates See note 24 to the standalone financial statements

The key audit matter How the matter was addressed in our audit

As disclosed in note 24 to the standalone financial

Our audit procedures included:

statements, revenue is measured net of any trade discounts

• Understanding the process followed by the

and volume rebates to customers (discounts and rebates).

Company to determine the amount of accrual for

Certain discounts and rebates for goods sold during the year are only finalised when the precise amounts are known

discounts and rebates.

and revenue therefore includes an estimate of variable

• Evaluating the design and implementation and

consideration. The variable consideration represents the

testing operating effectiveness of Company''s general

portion of discounts and rebates that are not directly

IT controls, key manual and application controls

deducted on the invoice and involves estimation by the

over the Company''s IT systems including controls

Company in recognition and measurement of such discounts

over rebates agreements / arrangements, rebate

and rebates. This includes establishing an accrual at year

payments / settlements and Company''s review over the

end, particularly in arrangements with customers involving varying terms which are based on annual contracts or

rebate accruals.

shorter-term arrangements. In addition, the value and

• Inspecting on a sample basis, key customer contracts.

timing of promotions for products varies from period to

Based on the terms and conditions relating to discounts

period, and the activity can span beyond the year end. The

and rebates, assessing the Company''s revenue

unsettled portion of the variable consideration results in

recognition policies with reference to the requirements

discounts and rebates due to customers as at year end.

of the applicable accounting standards.

• Performing substantive testing by selecting samples of discounts and rebates transactions recorded during the year as well as period end discounts and rebates accruals and matching the parameters used in the computation with the relevant source documents.

The key audit matter

How the matter was addressed in our audit

• Assessing the assumptions used and estimates of outcome and financial effect, including considering judgement of the Company, supplemented by experience of similar decisions previously made by the authorities and, in some cases, relevant opinions given by the Company''s advisors.

• Testing data used to develop the estimate for completeness and accuracy.

• Evaluating judgements made by the Company by comparing the estimates of prior year to the actual outcome.

• Assessing the Company''s disclosures in the standalone financial statements in respect of provisions and contingent liabilities.

Accounting for acquisition of GlaxoSmithKline Consumer Healthcare Limited

See note 40 to the standalone financial statements

The key audit matter

How the matter was addressed in our audit

As disclosed in note 40 to the standalone financial

Our audit procedures included:

statements, on 1 April 2020, the Company acquired

• Understanding the process followed by the Company

GlaxoSmithKline Consumer HealthCare Limited (GSK CH

India) under a scheme of amalgamation. The fair value

for assessment and determination of the effective

of the consideration transferred by the Company was

date and the accounting treatment for the scheme of

''40,242 crores.

amalgamation, including the identification of assets and liabilities and determination of their fair values and

Accounting for the acquisition involves judgement in order to: • Identify and measure the fair value of the identifiable

also evaluation of work of management experts.

assets (tangible and intangible) acquired and liabilities

• Evaluating the design and implementation and testing

assumed including the contingent liabilities.

the operating effectiveness of key internal controls (including management review control) related to the

• Allocate the consideration transferred between

Company''s valuation process, including assumptions

identifiable assets and liability and goodwill.

around near and long-term revenue growth rates

The most significant judgements made by the Company include:

and discount rate.

• Testing the completeness of the identified assets

• Determining the discount rate, near and long-term

acquired and liabilities assumed by comparison to the

revenue growth rate and projected margins to develop

scheme of amalgamation, through discussions with the

the fair value of the intangible assets, including

Company and their external valuation experts.

determination of their economic useful lives.

• Challenging the reasonableness of the key assumptions,

• Determining the comparable market rates, replacement

including discount rate, near and long-term revenue

cost and economic useful life to develop the fair value of

growth rate and projected margins for indefinite life

the property, plant and equipment.

intangible asset based on future business prospects and

Complex auditor''s judgement and specialised skills were

external industry growth rate.

also required in evaluating these assumptions for which

• Involving valuation professionals with specialised skills

management had engaged external valuation experts.

and knowledge to assist in:

This was a material acquisition for the Company and

- Evaluating the appropriateness of the valuation

given the level of estimation and judgement required, we

considered it to be a key audit matter.

methodologies applied and also, to test the inputs to the valuation models used to determine the value of the tangible and intangible assets.

The key audit matter

How the matter was addressed in our audit

- Evaluating the economic useful life for tangible and intangible assets.

- Evaluating the discount rate and long-term revenue growth rate applied by the Company by comparing it to a range of rates that were independently developed using publicly available market indices and market data for comparable entities. Applying additional sensitivities to assess the reasonableness of the above key assumptions.

- Evaluating market rates and replacement cost basis knowledge of the business and independent market sources to develop the fair value of property, plant and equipment.

• Testing data used to develop the estimate for completeness and accuracy.

• Involving our tax professionals with specialised skills and knowledge to assist in evaluating the management judgement to recognise and measure fair value of tax litigations, for selected matters.

• Evaluating the recognition of deferred tax liability for all temporary differences on date of acquisition (including those arising as a result of uncertainty over tax benefit of indefinite life intangibles).

Impairment assessment of Food & Refreshment Cash Generating Unit (F&R CGU) See note 4 to the standalone financial statements

The key audit matter How the matter was addressed in our audit

As disclosed in note 4 to the standalone financial statement, the F&R CGU includes ''17,301 crores of goodwill and ''27,210 crores of indefinite life intangible assets which together represents 65% of total assets of the Company as at 31 March 2021.

The recoverable value of the F&R CGU which is based on the value in use model, has been derived from discounted forecast cash flow model. This model requires the Company to make significant assumptions such as discount rate, near and long-term revenue growth rate and projected margins which involves inherent uncertainty since they are based on future business prospects and economic outlook.

Due to the materiality of above assets in context of the standalone financial statements and sensitivity of discount rate and near and long-term revenue growth rate assumptions where a minor changes could have a significant impact on the recoverable value, we have considered the impairment assessment of F&R CGU to be a key audit matter.

Our audit procedures included:

• Understanding the process followed by the Company in respect of the annual impairment analysis for F&R CGU.

• Evaluating the design and implementation and testing the operating effectiveness of key internal controls related to the Company''s process relating to review of the annual impairment analysis, including controls over determination of discount rate, near and long-term revenue growth rate and projected margins.

• Challenging the reasonableness of the assumptions, particularly forecasted revenue growth rate and margins based on our knowledge of the Company and market. Assessing historical accuracy by comparing past forecasts to actual results achieved.

The key audit matter

How the matter was addressed in our audit

• Involving the valuation professionals with specialised skills and knowledge to assist in evaluating the impairment model used and assumptions (including discount rate and long-term sales growth rate applied by the Company by comparing it to a range of rates that were independently developed using publicly available market indices and market data for comparable entities). Applying additional sensitivities to assess the reasonableness of the above key assumptions.

• Testing data used to develop the estimate for completeness and accuracy.

• Performing a sensitivity analysis to evaluate the impact of change in key assumption individually or collectively to the recoverable value.

• Assessing the adequacy of the Company''s disclosures in respect of its impairment testing.

Other Information

The Company''s management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company''s annual report, but does not include the standalone financial statements and our auditor''s report thereon.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. 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.

Management''s and Board of Directors'' Responsibility for the Standalone Financial Statements

The Company''s Management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs, profit/loss and other comprehensive

income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring 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 Management and Board of Directors are responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is 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 judgement and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to standalone financial statements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures in the standalone financial statements made by the Management and Board of Directors.

• Conclude on the appropriateness of the Management and Board of Directors 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.

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, 2016 (the Order) issued by the Central Government in terms of Section 143(11) of the Act, we give in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

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 standaLone baLance sheet, the standaLone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standaLone statement of cash fLows 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 Ind AS specified under Section 133 of the Act;

e) On the basis of the written representations received from the directors as on 31 March 2021 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2021 from being appointed as a director in terms of Section 164(2) of the Act; and

f) With respect to the adequacy of the internaL financial controls with reference to standalone financiaL statements of the Company and the operating effectiveness of such controls, refer to our separate Report in Annexure B.

>. 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 as at 31 March 2021 on its financiaL position in its standaLone financiaL statements - Refer Note 23 to the standalone financiaL statements;

ii. The Company did not have any Long-term contracts for which there were any materiaL foreseeabLe Losses. The Company has made provision, as required under the applicable Law or accounting standards, for material foreseeable Losses on derivative contracts - Refer Note 43 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; and

iv. The discLosures in the standaLone financiaL statements regarding hoLdings as weLL as deaLings in specified bank notes during the period from 8 November 2016 to 30 December 2016 have not been made in these standalone financial statements since they do not pertain to the financial year ended 31 March 2021.

4. With respect to the matter to be incLuded in the Auditor''s Report under Section 197(16) of the Act:

In our opinion and according to the information and explanations given to us, the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the Limit Laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other detaiLs under Section 197(16) which are required to be commented upon by us.

For B S R & Co. LLP

Chartered Accountants Firm''s Registration No. 101248W/W - 100022

Aniruddha Godbole

Partner

Membership No. 105149 Mumbai: 29 ApriL 2021 ICAI UDIN: 1105149AAAACH9056