Independent Auditors Report
The Shareholders of
Lyka Labs Limited
Report on the Financial Statements
We have audited the accompanying financial statements of LYKA LABS LIMITED (theCompany) which comprise the Balance Sheet as at June 30 2014 and the Statement ofProfit and Loss and Cash Flow Statement for the period ended on that date (in which areincorporated the accounts of the Companys branches at Ankleshwar and Tarapur auditedby other auditors after making such changes as were considered necessary for thepurpose of incorporation) and a summary of significant accounting policies and otherexplanatory information.
Managements Responsibility for the Financial Statements
The Companys Management is responsible for the preparation of these financialstatements that give a true and fair view of the financial position financial performanceand cash flows of the Company in accordance with the Accounting Standards referred to insub-section (3C) of section 211 of the Companies Act 1956 ("the Act") read withGeneral Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairsin respect of Section 133 of the Companies Act 2013. This responsibility includes thedesign implementation and maintenance of internal control relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India. Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on theauditors judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal control relevant to the Companys preparation and fairpresentation of the financial statements in order to design audit procedures that areappropriate in the circumstances but not for the purpose of expressing an opinion on theeffectiveness of the Companys internal control. An audit also includes evaluatingthe appropriateness of accounting policies used and the reasonableness of the accountingestimates made by management as well as evaluating the overall presentation of thefinancial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion.
Basis for Qualified Opinion
We draw attention to Note No. 38 relating to Capital Work In Progress of IntangibleAssets aggregating to Rs. 97257847.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matters described in the Basis for QualifiedOpinion paragraph the financial statements give the information required by the Act inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:
(a) in the case of the Balance Sheet of the state of affairs of the Company as at June30 2014;
(b) in the case of the Statement of Profit and Loss of the loss for the period endedon that date; and;
(c) in the case of the Cash Flow Statement of the cash flows for the period ended onthat date.
Emphasis of Matters
1. Note No. 35 regarding Sundry Debtors outstanding for more than six monthsaggregating to Rs. 112999170 considered good for recovery by the Company.
2. Note No. 36 regarding pending balance confirmation from Sundry Debtors SundryCreditors Loan Licensees and Loans & Advances.
3. Note No. 37 regarding non provision for diminution in value of investments.
Our opinion is not qualified in respect of all these matters.
1. Note No. 34 regarding unsecured loan to a party amounting to Rs. 52321737considered good for recovery by the Company.
2. Note No. 40 regarding slow/non-moving material aggregating to Rs. 7998296. Ouropinion is not qualified in respect of all these matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order 2003 as amended by theCompanies (Auditors Report) (Amendment) Order 2004 ("the said Order")issued by the Central Government of India in terms of sub-section (4A) of Section 227 ofthe Companies Act 1956 on the basis of such checks of the books and records of theCompany as we considered necessary and appropriate and according to the information andexplanations given to us during the course of the audit we enclose in the Annexure astatement on the matters specified in paragraphs 4 and 5 of the said Order.
2. As required by section 227(3) of the Act we report that:
a. We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit;
b. In our opinion proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books and proper returns adequatefor the purposes of our audit have been received from branches not visited by us;
c. The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account and with the Auditedreturns received from the branches;
d. except for the matter described in the Basis for Qualified Opinion paragraph in ouropinion the Balance Sheet Statement of Profit and Loss and Cash Flow Statement complywith the Accounting Standards referred to in sub- section (3C) of section 211 of theCompanies Act 1956 read with General Circular 15/2013 dated 13th September2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act2013;
e. On the basis of written representations received from the directors as on June 302014 and taken on record by the Board of Directors none of the directors is disqualifiedas on June 30 2014 from being appointed as a director in terms of section 164 of theCompanies Act 2013.
For M. A. Parikh & Co.
Firm Reg. No. 107556W
Mukul M. Patel
Membership No: 32489
Date: 28th August 2014
ANNEXURE TO THE AUDITORS REPORT
(Referred to in paragraph 1 of our report of even date)
(i) In respect of its Fixed Assets:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets except for Ankleshwar Division.
(b) There is a phased programme of verification which in our opinion is reasonablehaving regard to the size of the Company and the nature of its assets. The discrepanciesnoticed on such verification which are not material have been suitably dealt with in thebooks of account.
(c) In our opinion a substantial part of the fixed assets has not been disposed offduring the period hence the question of affecting the going concern status of the Companydoes not arise.
(ii) In respect of its Inventories:
(a) As explained to us inventories were physically verified during the period by themanagement at regular intervals except the inventories lying with the third parties fromwhom confirmations have been obtained.
(b) In our opinion and according to the information and explanations given to us theprocedures of physical verification of inventories followed by the management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.
(c) In our opinion and according to the information and explanations given to us theCompany has maintained proper records of its inventories and discrepancies noticed onphysical verification which are not material have been properly dealt with in the books ofaccount.
(iii) (a) The Company had granted interest bearing unsecured loan in earlier years to aparty covered in the register maintained under section 301 of the Companies Act 1956 (theAct) Rs. 10000000 which is repaid during the period. The Company has not granted anyloan during the period. The maximum amount outstanding at any time during the period andthe period end balance is Rs. 10000000 and Rs. Nil respectively.
(b) In our opinion the rate of interest and other terms and conditions of unsecuredloans given by the Company are prima facie not prejudicial to the interests of theCompany.
(c) Since the loan/interest is fully repaid during the year there is no overdue andhence the question of Company taking reasonable steps for recovery thereof does notarise.
(d) Since the loan/interest is fully repaid the question of regular receipt of theprincipal amounts and interest does not arise.
(e) According to information and explanations given to us during the period theCompany has received unsecured loan from 7 parties covered in the register maintainedunder section 301 of the Companies Act 1956 aggregating to Rs. 12710990. The maximumbalance outstanding at any time during the period and the period end balance are Rs.6276850 and Rs. 650694 respectively.
(f) The rate of interest and other terms and conditions of such unsecured loans are inour opinion prima facie not prejudicial to the interest of the Company.
(g) Since the principal and interest thereon are payable on demand the question ofpayment of the same being regular does not arise.
(iv) In our opinion and according to the information and explanations given to usthere are internal control procedures commensurate with the size of the Company and thenature of its business for the purchase of inventory and fixed assets and for the sale ofgoods and services except that procedure for confirmation and reconciliation of partybalance needs to be strengthened.
(v) (a) According to the information and explanations given to us the particulars ofcontracts or arrangements referred to in section 301 of the Act have been entered in theregister maintained thereunder.
(b) According to the information and explanations given to us the transactions made inpursuance of such contracts or arrangement have been made at prices which are prima faciereasonable having regard to the prevailing market prices at the relevant time except thatthe prices at which sales of branded pharma products made to the aforesaid parties duringthe period as informed to us are not comparable in view of marginal presence of theCompany in branded pharma products.
(vi) In our opinion and according to the information and explanations given to us theCompany has generally complied with the provisions of Sections 58A and 58AA and otherrelevant provisions of the Act and the rules framed thereunder and the directives issuedby the Reserve Bank of India where applicable with regard to the deposits accepted fromthe public.
(vii) In our opinion the scope and extent of internal audit is commensurate with thesize of the Company and the nature if its business.
(viii) We have broadly reviewed the books of account and records to the extentmaintained by the Company relating to the manufacture of Bulk Drugs and Formulationspursuant to the Order made by the Central Government for the maintenance of cost recordsunder Section 209(1)(d) of the Act and are of the opinion that prima facie most of theprescribed accounts and records have generally been made and maintained. We have howevernot made a detailed examination of the records with a view to determining whether they areaccurate or complete.
(ix) According to the information and explanations given to us and as per the relevantrecords produced before us in respect of statutory and other dues: (a) During the yearCompany has not been regular in depositing undisputed statutory dues relating to ProvidentFund Professional Tax E.S.I.C. Service Tax Income-tax Value Added Tax and Sales-tax.The arrears of the said dues as at the last day of the Financial Period and outstandingfor more than six months from the date they become payable are as follows:
|Nature of Dues ||Amount |
| ||(Rs.) |
|1. Sales Tax deferral Scheme-SICOM ||2314995 |
|2. Professional Tax ||304219 |
|3. Service Tax Payable ||195629 |
(b) Following disputed dues have not been deposited since the matters are pending withthe respective forums:
|Nature of dues ||Amount ||Period to which the ||Name of Forum |
| ||(Rs.) ||amount relates || |
|1. Demand under Drugs Price Control Order ||209440565 ||Demands raised in 1987 1990 and 1995 ||Gujarat High Court |
|2. Purchase Tax ||1600442 ||1991-96 ||Gujarat Sales Tax Appellate Tribunal |
|3. Excise duty ||1122138 ||Since August 22 2006. ||Commissioner of Excise & Customs |
| ||10875257 ||Since September 1995 to February 2000. ||Customs Excise & Service Tax Appellate Tribunal |
|4. Bombay Sales Tax ||6186400 ||1998-99 ||Appellate Tribunal. |
| ||9824035 ||2000-01 || |
| ||420682 ||2002-03 || |
| ||379164 ||2004-05 || |
| ||792379 ||2006-07 || |
|5. Central Sales Tax ||1795241 ||1998-99 ||Appellate Tribunal |
| ||1096776 ||2000-01 || |
|6. Service Tax ||1809830 ||2011-12 ||Additional Commissioner |
|7. Gujarat Sales Tax ||8545195 ||2002-03 ||Commissioner of Sales Tax Appeal |
| ||1370850 ||2006-07 || |
| ||673902 ||2007-08 || |
| ||6455421 ||2009-10 || |
(x) The accumulated losses of the Company have not exceeded fifty per cent of its networth as at the end of the period. The Company has incurred cash losses during the period.In the immediately preceding Financial Year the Company had not incurred cash losses.
(xi) According to the information and explanations given to us and based on our auditprocedures the Company has generally not defaulted in the repayment of dues to banks.
(xii) According to the information and explanations given to us the Company has notgranted any loans and advances on the basis of security by way of pledge of sharesdebentures and other securities. Therefore the provisions of clause 4 (xii) of the"Order" are not applicable to the Company.
(xiii) In our opinion the Company is not a chit fund or a nidhi mutual benefitfund/society. Therefore the provisions of clause 4(xiii) of the "Order" are notapplicable to the Company.
(xiv) The Company is not dealing in or trading in shares securities debentures andother investments. The shares held by the Company stratigic investments are held in itsown name.
(xv) In our opinion and according to the information and explanations given to us theterms and conditions on which the Company has given a guarantees for loan taken by itssubsidiary from a bank are prima facie not prejudicial to the interests of the Company.
(xvi) To the best of our knowledge and belief and according to the information andexplanations given to us term loans availed by the Company were prima facie applied bythe Company during the period for the purposes for which the loans were obtained.
(xvii) According to the records examined by us and the information and explanationsgiven to us on an overall basis funds raised on short-term basis have not been generallyused for long term purposes.
(xviii) The Company has not made preferential allotment of shares during the period toparties covered under section 301 of the Act. Therefore the provisions of clause 4(xviii) of the "Order" are not applicable to the Company.
(xix) According to the information and explanations given to us and the recordsexamined by us the Company has created a charge in respect of the privately placed NonConvertible Debentures issued during the period aggregating to Rs. 6300000.
(xx) The Company has not raised money by public issue during the period and accordinglythe question of disclosure of end use of money raised does not arise.
(xxi) To the best of our knowledge and belief and according to the information andexplanations given to us and considering the size and nature of the Companysoperations no fraud of material significance on or by the Company has been noticed orreported during the period.
For M. A. Parikh & Co.
Firm Reg. No. 107556W
Mukul M. Patel
Membership No: 32489
Date: 28th August 2014