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Orchid Pharma Ltd.

BSE: 524372 Sector: Health care
NSE: ORCHIDPHAR ISIN Code: INE191A01019
BSE LIVE 11:17 | 18 Oct 17.65 -0.30
(-1.67%)
OPEN

17.80

HIGH

18.20

LOW

17.60

NSE 11:05 | 18 Oct 17.70 -0.25
(-1.39%)
OPEN

18.00

HIGH

18.00

LOW

17.50

OPEN 17.80
PREVIOUS CLOSE 17.95
VOLUME 12233
52-Week high 39.75
52-Week low 16.70
P/E
Mkt Cap.(Rs cr) 157
Buy Price 17.65
Buy Qty 267.00
Sell Price 17.90
Sell Qty 1050.00
OPEN 17.80
CLOSE 17.95
VOLUME 12233
52-Week high 39.75
52-Week low 16.70
P/E
Mkt Cap.(Rs cr) 157
Buy Price 17.65
Buy Qty 267.00
Sell Price 17.90
Sell Qty 1050.00

Orchid Pharma Ltd. (ORCHIDPHAR) - Auditors Report

Company auditors report

To the Members of M/s.Orchid Pharma Limited

Report on the Standalone Financial Statements

1. We have audited the accompanying standalone financial statements of Orchid PharmaLimited ("the Company") which comprise the Balance Sheet as at 31st March 2017the Statement of Profit and Loss the Cash Flow Statement for the year then ended and asummary of the significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements

2. 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 financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules2014. 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 financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

Auditor's Responsibility

3. Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

4. 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.

5. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.

6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.

7. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.

Basis of qualified opinion

I. The Company has given advances amounting to Rs.726 crores to variousparties and are outstanding as on March 31 2017. The Company has not received anymaterials / capital goods against these advances. As per information and explanationgiven the Company is not able to take delivery of materials due to financial constraints.We are not able to express any opinion on the recoverability of these amounts.

II. The Company has investments of Rs.28.25 Crores in one of its subsidiary carrying onresearch and development activities. The subsidiary has not been spending any money on theresearch during the current period as no financial support is given by the parent Companyand the parent Company has not allocated any funds for the future development. Noinformation is also available with the company regarding the value of molecules availablewith the company. In view of the above it is necessary to impair the value of thisinvestment.

III. The Company has an exposure of Rs.27.35 crores towards receivable from one of itsmarketing subsidiary whose net worth is negative. Provision has not been made for same IV.The Company has not received confirmation of balance from banks for loans amounting toRs.290.89 crores

Opinion

8. In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis of Qualified

Opinion paragraph the aforesaid standalone 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 of the state of affairs of theCompany as at 31st March 2017 and its Loss and its cash flows for the year ended on thatdate.

Emphasis of Matter

As on March 31 2017 the Company has negative net worth of Rs.26383.31 lakhs and theCurrent Liabilities exceeds Current Assets by Rs.56661.08 Lakhs. The Company has beencontinuously incurring cash losses. Plants have been operating in much lower capacities.The Company's ability to continue as going concern depends upon the satisfactoryresolution of the above said uncertainties. However the Company has continued to prepareaccounts on going concern basis. We were informed that the management is in the process ofcomprehensively restructuring its business operations/ finances including identificationof strategic investor to overcome the above uncertainties.

Our opinion is not modified in respect of this matter

Report on Other Legal and Regulatory Requirements

9. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in Annexure "A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.

10. As required by Section 143 (3) of the Act we report that: (a) We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit; (b) In our opinion proper books ofaccount as required by law have been kept by the Company so far as it appears from ourexamination of those books; (c) The Balance Sheet the Statement of Profit and Loss andthe Cash Flow Statement dealt with by this Report are in agreement with the books ofaccount; (d) Except for the effects of the matter described in the Basis for QualifiedOpinion Paragraph in our opinion the aforesaid standalone financial statements complywith the Accounting Standards specified under Section 133 of the Act read with Rule 7 ofthe Companies (Accounts) Rules 2014;

(e) In respect of matter having adverse effect on functioning of Company refer Basis ofQualified Opinion (f) On the basis of the written representations received from thedirectors as on 31st March 2017 taken on record by the Board of Directors none of thedirectors is disqualified as on 31st March 2017 from being appointed as a director interms of Section 164 (2) of the Act; (g) With respect to the adequacy of the internalfinancial controls over financial reporting of the Company and the operating effectivenessof such controls refer to our separate Report in "AnnexureB" and (h) Withrespect to the other matters to be included in the Auditor's Report in accordance withRule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to the bestof our information and according to the explanations given to us: i. The Company hasdisclosed the impact of pending litigations on its financial position in its financialstatements – Refer Note 28 to the financial statements; ii. The Company has madeprovision as required under the applicable law or accounting standards for materialforeseeable losses if any on long-term contracts including derivative contracts; iii.There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company. iv. The Company has providedrequisite disclosures in the standalone financial statements as to holding as well asdealings in Specified Bank Notes during the period from 8th November 2016 to December2016 on the basis of information available with the Company. Based on audit proceduresand relying on management's representation we report that disclosures are in accordancewith the books of accounts maintained by the Company and as produced to us by theManagement - Refer Note 43 to the standalone financial statements;

For SNB ASSOCIATES
Chartered Accountants
Firm Registration No: 015682N
P. Bharath Kumar
Place: Chennai Partner
Date: May 26 2017 Membership No.222579

Annexure "A" to Auditor's Report

Referred to in paragraph 9 of our report of even date i). a) The company hasmaintained proper records showing full particulars including quantitative details andsituation of fixed assets. b) Fixed assets have been physically verified by the Managementduring the year based on a phased programme of verifying all the assets over three yearswhich in our opinion is reasonable having regard to the size of the company and the natureof its Fixed Assets. The discrepancies noticed on such verification were not material andhave been properly dealt with in the books of account. c) According to the information andexplanations given to us and on the basis of our examination of the records of theCompany the title deeds of immovable properties are held in the name of the Company ii)The Management has conducted physical verification of inventory at reasonable intervalsand no material discrepancies were noticed on physical verification. iii) According to theinformation and explanations given to us the Company has not granted any loans securedor unsecured to companies firms or other parties covered by clause (76) of Section 2 ofthe Companies Act 2013. Accordingly sub-clauses (a) (b) and (c) of clause (iii) ofparagraph 3 of the Order are not applicable. iv) In our opinion and according to theinformation and explanations given to us the Company has complied with the provisions ofsection 185 and 186 of the Act with respect to the loans and investments made. TheCompany has not provided any guarantees / security. v) The Company has not accepted anydeposits from the public. vi) We have reviewed the cost records maintained by the Companyas prescribed by the Central Government under Section 148(1) of the Companies Act 2013and are of the opinion that prima facie the prescribed cost records have been made andmaintained. We have however not made a detailed examination of the cost records with aview to determine whether they are accurate or complete. vii) a. According to theinformation and explanations given to us and on the basis of our examination of the booksof account the Company has not been regular in depositing undisputed statutory duesincluding Provident Fund

Employees' State Insurance Income Tax Sales Tax Service tax Duty of Customs Dutyof Excise Value Added Tax Cess and other statutory dues during the year with theappropriate authorities. There has been continuous delay in payment of the dues. b. As atthe Balance Sheet date the following are the details of disputed Income Tax Excise DutyCustoms Duty Service tax Sales Tax and Cess that have not been deposited with theconcerned authorities;

Nature of Dues Amount (Rs. in Lakhs) Forum where dispute is pending
Excise Duty
For the year financial year 2005-06 to 2014-15 334.50 CESTAT
For the financial year 2007-08 to 2015-16 19.37 Commissioner (Appeals)
For the financial year 2010-11 to 2012-13 0.50 Deputy Commissioner
Service Tax
For the year financial year 2005-06 to 2010-11 77.50 CESTAT
For the year financial year 2007-08 7.76 Commissioner (Appeals)
to 2011-12
Sales tax
For the year 2008-09 – 2012-13 498.89 Appellate Deputy Commissioner of Commercial taxes Chennai

viii) According to the information and explanations given to us the company hasdefaulted in certain repayments of Principal amount to banks and Financial Institution asper details given in Annex to Audit report. ix) The Company did not raise any money by wayof initial public offer or further public offer (including debt instruments) and termloans during the year. Accordingly paragraph 3 (ix) of the Order is not applicable.

x) According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit. xi) According to the information and explanations give to us andbased on our examination of the records of the Company the Company has paid/provided formanagerial remuneration during the financial year in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013. xii) In our opinion and according to the information and explanations given tous the Company is not a Nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable. xiii) According to the information and explanations given to us and based onour examination of the records of the Company transactions with the related parties arein compliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards. xiv) According to the information and explanations give to us andbased on our examination of the records of the Company the Company has not madepreferential allotment of shares to parties covered in the register maintained underSection 42 of the Companies Act 2013 xv) Based on the representation received by theCompany and declaration given by the Directors the Company has not entered into non-cashtransactions with directors or persons connected with them xvi) The Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.

For SNB ASSOCIATES
Chartered Accountants
Firm Registration No: 015682N
P. Bharath Kumar
Place: Chennai Partner
Date: May 26 2017 Membership No.222579

Annexure "B" to Auditor's Report

Referred to in paragraph 9 of our report of even date

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

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

1. We have audited the internal financial controls over financial reporting of OrchidPharma Limited ("the Company") as of 31 March 2017 in conjunction with our auditof the standalone financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

2. 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 Financial Reportingissued by the Institute of Chartered Accountants of India (‘ICAI'). 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 Companies Act 2013.

Auditors' Responsibility

3. 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 Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the 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 judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

5. 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

6. A company's internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures 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

7. 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

8. 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 March 31 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 SNB ASSOCIATES
Chartered Accountants
Firm Registration No: 015682N
P. Bharath Kumar
Place: Chennai Partner
Date: May 26 2017 Membership No.222579