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Indo Rama Synthetics (India) Ltd.

BSE: 500207 Sector: Industrials
NSE: INDORAMA ISIN Code: INE156A01020
BSE 15:40 | 19 Jan 48.15 -0.95
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45.60

NSE 15:57 | 19 Jan 48.00 -1.20
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OPEN 49.90
PREVIOUS CLOSE 49.10
VOLUME 72643
52-Week high 57.50
52-Week low 26.20
P/E
Mkt Cap.(Rs cr) 731
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 49.90
CLOSE 49.10
VOLUME 72643
52-Week high 57.50
52-Week low 26.20
P/E
Mkt Cap.(Rs cr) 731
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Indo Rama Synthetics (India) Ltd. (INDORAMA) - Auditors Report

Company auditors report

To the Members of

Indo Rama Synthetics (India) Limited

1. Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Indo RamaSynthetics (India) Limited ("the Company") which comprise the Balance Sheet asat 31 March 2017 the Statement of Profit and Loss (including "Other ComprehensiveIncome") the Cash Flow Statement and the Statement of Changes in Equity for the yearthen ended and a summary of the significant accounting policies and other explanatoryinformation.

2. Management's Responsibility for the Standalone Ind AS Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of the stateof affairs (financial position) profit or loss (financial performance including othercomprehensive income) cash flows and changes in equity of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) prescribed under section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalone IndAS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

3. Auditor's Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financialstatements based on our audit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the standalone Ind AS financial statements are freefrom material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the standalone Ind AS financial statements. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the standalone Ind AS financial statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the standalone Ind AS financial statements thatgive a true and fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the standalone Ind ASfinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the standalone Ind AS financialstatements.

4. Basis for Qualified Opinion

(i) Attention is drawn to note 41 (c) of the standalone Ind AS financial statementsrelating to Deferred Tax Assets amounting to Rs. 54.08 crores as at 31 March 2017recognised by the Company on the basis of future outlook of business confirming thatsufficient future taxable income will be available against which these assets will berealised. In view of losses suffered in the current as well as preceding periods andother unused tax losses available to the Company we are not in agreement with thedeferred tax assets recognised. Had such asset not been recognised the net loss after taxfor the year would have been higher by Rs. 54.08 crores and other equity as at 31 March2017 would have been lower by Rs. 54.08 crores.

(ii) Attention is drawn to note 39 (b) of the standalone Ind AS financial statementswhich enumerates recognition of interest of Rs. 13.87 crores in the books by the Companyon the insurance claim recoverable from its insurance company for the loss of certainassets and loss suffered due to business interruption at its plant in 2007-08. The saidrecognition of asset being contingent in nature is not in accordance with accountingprinciple stated in Ind AS 37 ‘Provisions Contingent Liabilities and ContingentAssets'. Had such income not been recognised the net loss before and after tax for theyear ended 31 March 2017 would have been higher by Rs. 2.92 crores and net loss beforetax for the year ended 31 March 2016 would have been higher by Rs. 10.95 crores and thenet profit after tax for the year ended 31 March 2016 would have been lower by Rs. 10.95crores and other equity as at 31 March 2017 would have been lower by Rs. 13.87 crores.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the matter descried in the ‘Basis for Qualified Opinion'paragraph above the aforesaid standalone Ind AS financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India including Ind AS of the stateof affairs (financial position) of the Company as at 31 March 2017 of its loss (financialperformance including other comprehensive income) its cash flows and changes in equityfor the year ended on that date.

6. Emphasis of matter

We draw an attention to note 39(a) of the standalone Ind AS financial statements whichdescribes the uncertainty related to the outcome of the lawsuit filed by the Companyagainst an insurance company. Our opinion is not modified in respect of this matter.

7. Report on Other Legal and Regulatory Requirements

(i) 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"Annexure I" a statement on the matters specified in paragraphs 3 and 4 of theOrder.

(ii) 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 bestof our knowledge and belief were necessary for the purposes of our audit;

b. Except for the effects of the matter described in the ‘Basis for QualifiedOpinion' paragraph above in our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;

c. The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) the Cash Flow Statement and Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account;

d. Except for the effects of the matter described in the ‘Basis for QualifiedOpinion' paragraph in our opinion the aforesaid standalone Ind AS financial statementscomply with the Indian Accounting Standards prescribed under Section 133 of the Act;

e. The matter described in the ‘Basis for Qualified Opinion' and matter describedunder ‘Emphasis of matter' paragraph above in our opinion may have an adverseeffect on the functioning of the Company;

f. On the basis of the written representations received from the directors as on 31March 2017 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2017 from being appointed as a director in terms of Section164 (2) of the Act;

g. The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the ‘Basis for Qualified Opinion' paragraphabove;

h. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure II";

i. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand 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 financialposition in its standalone Ind AS financial statements – Refer notes 37 and 39 to thestandalone Ind AS financial statements;

(ii) The Company did not have any long-term contracts including derivative contractsoutstanding as at 31 March 2017 for which there were any material foreseeable losses;

(iii) There has been no delay in transferring amounts that were required to betransferred to the Investor Education and Protection Fund by the Company; and

(iv) The Company has provided requisite disclosures in its standalone Ind AS financialstatements as to holdings as well as dealings in specified Bank Notes during the periodfrom 8 November 2016 to 30 December 2016 and these are in accordance with the books ofaccounts maintained by the Company. Refer note 36 to the standalone Ind AS financialstatements.

For B S R and Associates
Chartered Accountants
ICAI Firm Registration Number: 128901W
Jiten Chopra
Place: Gurgaon Partner
Date: 18 May 2017 Membership No.: 092894

ANNEXURE I REFERRED TO IN PARAGRAPH 7(I) OF THE INDEPENDENT AUDITOR'S REPORT TO THEMEMBERS OF INDO RAMA SYNTHETICS (INDIA) LIMITED ON THE STANDALONE IND AS FINANCIALSTATEMENTS FOR THE YEAR ENDED 31 MARCH 2017:

(i) (a) According to the information and explanations given to us the Company hasmaintained proper records showing full particulars including quantitative details andsituation of fixed assets.

(b) According to the information and explanations given to us the fixed assets arephysically verified by the management in accordance with a phased programme designed tocover all items of fixed assets over a period of three years which in our opinion isreasonable having regard to the size of the Company and nature of its fixed assets. Inaccordance with this programme certain categories of fixed assets at certain locationshave been physically verified by the management during the year. As informed to us nomaterial discrepancies were observed on such verification.

(c) According the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of the immovable properties areheld in the name of the Company.

(ii) According to the information and explanations given to us the inventories exceptfor goods in transit and stocks with third parties have been physically verified atreasonable interval by the management during the year. For stocks lying with third partiesat the year end written confirmations are obtained. As informed to us no materialdiscrepancies were noticed on such verification.

(iii) According to the information and explanations given to us the Company duringthe earlier periods had granted unsecured loans to a wholly owned subsidiary companyamounting to Rs. 43.57 crores covered in the register maintained under Section 189 of theCompanies Act 2013. The entire amount along with interest thereon has been repaid duringthe year.

(iv) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company there are no loans investments guaranteesand security where provisions of section 185 and 186 of the Act are required to becomplied with. Accordingly the provisions of paragraph 3(iv) of the Order is notapplicable.

(v) According to the information and explanations given to us the Company has notaccepted any deposits covered under section 73 to 76 of the Act. Accordingly theprovisions of paragraph 3(v) of the Order is not applicable.

(vi) We have broadly reviewed the books of account maintained by the Company in respectof products where pursuant to the rules made by the Central Government the maintenanceof cost records has been prescribed under sub section (1) of section 148 of the CompaniesAct 2013 and are of the opinion that prima facie the prescribed accounts and recordshave been made and maintained. However we have not made a detailed examination of suchrecords with a view to determine whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including Provident Fund Employees' StateInsurance Income tax Sales tax Service tax Duty of Customs Duty of Excise ValueAdded Tax Cess and any other material statutory dues to the extent applicable havegenerally been regularly deposited with the appropriate authorities during the year.

According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees' State Insurance Income tax Sales taxService tax Duty of Customs Duty of Excise Value Added tax Cess and other materialstatutory dues to the extent applicable were in arrears as at 31 March 2017 for a periodof more than six months from the date they became payable.

(b) According to the information and explanations given to us and on the basis of therecords of the Company examined by us there are no dues of Income tax Sales tax Servicetax Duty of Customs Duty of Excise and Value Added Tax which have not been depositedwith the appropriate authorities on account of any dispute except as mentioned below:

Name of the statute Nature of dues Amount of dispute (Rs. Crores) # Amount paid under protest (Rs. Crores) Period to which it relates Forum where dispute is pending
The Central Excise Act 1944 Duty of Excise 1.06 - 2002-03
5.70 2.50 2003-04 to 2005-06 Bombay High Court Nagpur
0.51 - March 2008- December 2010 Bench
59.37 5.90 1996- 97 and 2000- 01 to 2009-10 Customs Excise and Service Tax Appellate Tribunal
13.31 - 1996-97 to 2008-09 and 2012 Commissioner of Central Excise and Customs (Appeals)
24.06 - 1997-98 to 2015-16 Commissioner/ Assistant Commissioner/ Deputy Commissioner
Bombay Sales Tax Act1959/ Central Sales Tax Act 1956 Sales Tax 0.43 0.13 1998-99 to 1999-00 Joint Commissioner Sales Tax (Appeals) Nagpur
Maharashtra Value Added Tax Act 2002 Value Added Tax 17.59 5.60 2008-09 to 2013-14
Customs Act 1962 Duty of 214.25 - 2006-07 Supreme Court
Customs 3.67 0.13 2014-15 and 2015-16 Customs Excise and Service Tax Appellate Tribunal
6.01 - 2006-07 Commissioner of Customs
0.04 - 1997- 98 to 1998-99 Assistant Commissioner/ Deputy Commissioner
Finance Act 1994 Service Tax 0.22 0.08 2004-05 to 2009-10 Customs Excise and Service Tax Appellate Tribunal
0.22 - 2002-03 to 2005-06 Commissioner Nagpur
0.89 0.01 2007-08 2010-11 to 2013-14 Commissioner (Appeals) Nagpur
0.31 - 1997-98 2000-01 and 2010-11 to 2014-15 Assistant/ Deputy Commissioner Nagpur
Income tax Act 1961 * Income Tax 0.26 0.26 AY 2006-07 Commissioner of Income Tax (Appeals)
9.91 6.19 AY 2004-05 and AY 2007-08 Income Tax Appellate Tribunal

*excluding cases where losses/unabsorbed depreciation have been adjusted by the taxauthorities without raising any demands though disputed by the Company.

# including interest/penalties where quantified and demanded by authorities.

(viii) According to the information and explanations given to us the Company has notdefaulted in the payment of loans or borrowing to the banks except for certain delays inthe repayment of dues (cash credit accounts) to banks. Details of delays and amount indefault outstanding as at 31 March 2017 are given below:

Bank Name Nature of loan Total amount delayed No of days Amount outstanding as at 31 March 2017
(Rs. Crores) (Rs. Crores)
Bank of India Overdrawn 242.67 1 to 48 days 11.79
HDFC Bank Overdrawn 71.18 2 to 59 days -
Punjab National Bank Overdrawn 114.83 1 to 67 days 12.64
State Bank of India Overdrawn 109.38 4 to 34 days 14.68
State Bank of Travancore Overdrawn 141.50 1 to 63 days -
Oriental Bank of Commerce Overdrawn 116.34 5 to 46 days 14.92
Axis Bank Overdrawn 104.52 1 to 77 days 0.05

Further there are no loans or borrowings from financial institutions or government andthere are no dues to debenture holders during the year.

(ix) According to the information and explanations given to us the term loan taken bythe Company have been applied for the purposes for which they were raised. The Company hasnot raised any moneys by way of initial public offer or further public offer.

(x) According to the information and explanations given to us no fraud by the Companyor on the Company by its Officers or employees has been noticed or reported during theyear.

(xi) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the managerial remuneration has been paid/provided in accordance with the provisions of section 197 read with Schedule V to theCompanies Act 2013 except Rs. 4.81 crores which has been paid as Managerial Remunerationby the Company to two of its directors for services rendered subsequent to remunerationperiod approved by the Central Government vide approval SRH B61072120/4/2013-CL VII andB75482356/4/2013-CL. VII respectively. The Company is awaiting approval of its submissionfiled under relevant rules.

(xii) According to the information and explanations given to us the Company is not aNidhi Company. Accordingly the provisions of paragraph 3(xii) of the Order is notapplicable.

(xiii) According to information and explanations given to us and on the basis of ourexamination of the records of the Company all transactions with the related parties arein compliance with section 177 and 188 of the Act where applicable and the details havebeen disclosed in the standalone Ind AS financial statements as required by theapplicable accounting standards.

(xiv) According to information and explanations given to us the Company has not madeany preferential allotment or private placement of shares or fully or partly convertibledebentures during the year. Accordingly the provisions of paragraph 3(xiv) of the Orderis not applicable.

(xv) According to information and explanations given to us the Company has not enteredinto any non-cash transactions with directors or persons connected with him. Accordinglythe provisions of paragraph 3(xv) of the Order is not applicable.

(xvi) According to information and explanations given to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.

For B S R and Associates
Chartered Accountants
ICAI Firm Registration Number: 128901W
Jiten Chopra
Place: Gurgaon Partner
Date: 18 May 2017 Membership No.: 092894

ANNEXURE II REFERRED TO IN PARAGRAPH 7(II)(H) OF THE INDEPENDENT AUDITOR'S REPORT TOTHE MEMBERS OF INDO RAMA SYNTHETICS (INDIA) LIMITED ON THE STANDALONE IND AS FINANCIALSTATEMENTS FOR THE YEAR ENDED 31 MARCH 2017

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of Indo RamaSynthetics (India) Limited ("the Company") as of 31 March 2017 in conjunctionwith our audit of the standalone Ind AS financial statements of the Company for the yearended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on ‘Audit of Internal Financial Controls Over FinancialReporting' issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on ‘Audit of Internal Financial Controls Over FinancialReporting' (the "Guidance Note") and the Standards on Auditing issued by ICAIand deemed to be prescribed under section 143(10) of the Act to the extent applicable toan audit of internal financial controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2017 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on ‘Audit ofInternal Financial Controls Over Financial Reporting' issued by the Institute of CharteredAccountants of India.

For B S R and Associates
Chartered Accountants
ICAI Firm Registration Number: 128901W
Jiten Chopra
Place: Gurgaon Partner
Date: 18 May 2017 Membership No.: 092894