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Aarti Industries Ltd.

BSE: 524208 Sector: Industrials
NSE: AARTIIND ISIN Code: INE769A01020
BSE 00:00 | 17 May 1743.90 33.20
(1.94%)
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1758.00

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NSE 00:00 | 17 May 1744.15 34.15
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OPEN 1725.00
PREVIOUS CLOSE 1710.70
VOLUME 53046
52-Week high 1815.35
52-Week low 850.95
P/E 62.44
Mkt Cap.(Rs cr) 30,386
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1725.00
CLOSE 1710.70
VOLUME 53046
52-Week high 1815.35
52-Week low 850.95
P/E 62.44
Mkt Cap.(Rs cr) 30,386
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Aarti Industries Ltd. (AARTIIND) - Auditors Report

Company auditors report

To the Members of Aarti Industries Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the Standalone Financial Statements of Aarti Industries Limited("the Company") which comprise the Balance Sheet as at March 31 2020 and thestatement of Profit and Loss (statement of changes in equity) and statement of cash flowsfor the year then ended and notes to the Standalone Financial Statements including asummary of significant accounting policies and other explanatory.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Financial Statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2020 and profit/loss changes in equity and its cash flows the year endedon that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder Section 143(10) the Companies Act 2013. Our responsibilities under those Standardsare further described in the Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements Section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of theStandalone Financial Statements under the provisions of the Companies Act 2013 and theRules thereunder and we have fulfilled our other ethical responsibilities in accordancewith these requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key Audit Matters are those matters that in our professional judgment were of mostsignificance 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 FinancialStatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. Due to COVID-19 lockdown throughout the country sincelast week of March 2020 we have adopted alternative methodologies solutions in performingour audit procedures. We have determined the matters described below to the Key AuditMatters to be communicated in the Report.

# Audit Matters Auditor's Response
Audit Approach and Principal Audit Procedures
1 Accuracy Completeness and disclosure with reference to IND AS-16 of Property Plant and Equipments (Including CapEx) Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
Peculiarity and technical complexities of Property Plant and Equipments used in the operations and multiple IT systems used for maintaining Fixed Asset Register (FAR) tracking and monitoring CapEx requires more attention to ensure reasonable accurateness and completeness of financial reporting in respect of Property Plant and Equipments. a) We assessed Company's process regarding maintenance of records valuation and accounting of transactions pertaining to Property Plant and Equipment including Capital Work in Progress with reference to Indian Accounting Standard 16.
b) We have evaluated the design of Internal Controls relating to recording and valuation of Property Plant and Equipment.
Further technical complexities requires management to assess and make estimates/ judgments about capitalisation estimated useful life impairment etc. which has material impact on Balance Sheet and operating results Refer note 1 to financial statements c) We have carried out substantive audit procedures at financial and assertion level to verify the capitalisation of asset as Property Plant and Equipment
d) We have verified the maintenance of records and accounting of transactions regarding capital work in progress by carrying out substantive audit procedures at financial and assertion level.
e) We have reviewed management judgment pertaining to estimation of useful life and depreciation of the Property Plant and Equipment in accordance with Schedule II of Companies Act 2013.
f) We have carried out physical verification on sample basis in respect of Property Plant and Equipment.
g) We have verified the capitalisation of borrowing cost incurred on qualifying asset in accordance with the Indian Accounting Standard 23
2 Valuation Accuracy Completeness and disclosures pertaining to Inventories with reference to Ind AS 2 Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
Inventories constitutes material component of financial statement. Correctness completeness and valuation are critical for reflecting true and fair financial results of operations. Further due to continuous nature of plant operations and the raw materials which are basically chemicals management has to exercise its judgment in assessing stage of the product and its valuation. Refer note 4 to financial statements a) We assessed the Company's process regarding Maintenance of records Valuation and accounting of transactions relating to Inventory as per the Indian Accounting Standard 2.
b) We have evaluated the design of Internal Controls relating to recording and valuation of Inventory.
c) We have carried out substantive audit procedures to verify the allocation of overheads to Inventory.
d) We have carried out physical verification of Inventory on test check basis.
e) We have verified consistency in respect of valuation process and methodology followed
3 Valuation Presentation and Disclosure pertaining to advances received for export commitments under long term contracts. The Company has entered into long term contracts for exports of materials. Under these contracts the Company has received advances to expedite establishment of production facilities.
The contracts entered into covers a span of 10 to 20 years. Estimated exports which will happen over the period of contract at a later stage requires management to exercise its judgment. Based on the judgment and the carrying value of the advances received its fair presentation is critical. Refer note 13 to financial statements Our audit approach consisted substantive testing as follows:
a) We have reviewed the terms of contracts entered into by the Company
b) The classification presentation of the said advances received under these contracts was tested
c) The fairness of value reflected in financial statement was verified and tested.
d) Disclosure notes pertaining to said advances in financial statement was reviewed.

Information Other than the Standalone Financial Statements and Auditor's Report thereon

The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report with its annexures but does not includeStandalone Financial Statements and our auditor's report thereon.

Our opinion on the Standalone Financial Statements does not cover the other informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the Standalone Financial Statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the Standalone Financial

Statements or our knowledge obtained during the course of our audit or otherwiseappears to be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this information; we required to report that fact. We have nothing toreport in this regard.

Management's Responsibility for the Standalone 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

Financial Statements that give a true and fair view of the financial positionfinancial performance (changes in equity) and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the accountingStandards specified under Section 133 of the Act. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate implementation andmaintenance of 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 financialstatement that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the Standalone Financial Statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

The Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the StandaloneFinancial Statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these Standalone Financial Statements.

As a part of an audit in accordance with SA's we exercise professional judgment andmaintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the StandaloneFinancial Statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)

(i) of the Companies Act 2013 we are also responsible for expressing our opinion onwhether the company has adequate internal financial controls system in place and theoperating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe Standalone Financial

Statements or if such disclosures are inadequate to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

• Evaluate the overall presentation structure and content of the StandaloneFinancial Statements including the disclosures and whether the Standalone Financial

Statements represent the underlying transactions and events in a manner that achievesfair presentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters 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 orregulation precludes public disclosure about the matter or when in extremely rarecircumstances we determine that a matter should not be communicated in our report becausethe adverse consequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. 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) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.

(c) The Balance Sheet the Statement of Profit and Loss the Cash Flow Statement dealtwith by this Report are in agreement with the books of account.

(d) In our opinion the aforesaid Standalone Financial

Statements comply with the Accounting Standards specified under Section 133 of the Actread with Rule 7 of the Companies (Accounts) Rules 2014.

(e) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct.

(f) 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 A".

(g) 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 Financial Statements Refer Note 26 to the Standalone FinancialStatements;

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

2. 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 Companies Act 2013 we give in the "Annexure B" a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.

For Kirtane & Pandit LLP
Chartered Accountants
FRN: 105215W/W100057
Milind Bhave
Partner
Place: Mumbai M. No. 047973
Date: May 25 2020 UDIN : 20047973AAAABT9861

Annexure A to the Auditor's Report – March 31 2020

Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")

We have audited the internal financial controls over financial reporting of AartiIndustries Limited ("the Company") as of March 31 2020 in conjunction with ouraudit of the Standalone Financial Statements of the Company for the year ended on thatdate.

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 Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.

Auditors' 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 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 of

India. 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.

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 judgment including the assessment of the risks ofmaterial misstatement of the Standalone Financial Statements whether due to fraud orerror.

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 Standalone 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 StandaloneFinancial Statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the Standalone

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 periods are subject to the risk that the internal financial control overfinancial reporting may become inadequate because of changes in conditions or that thedegree 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 March 31 2020 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 Kirtane & Pandit LLP
Chartered Accountants
FRN: 105215W/W100057
Milind Bhave
Partner
Place: Mumbai M. No. 047973
Date: May 25 2020 UDIN : 20047973AAAABT9861

Annexure B to the Auditor's Report – March 31 2020

Annexure B referred to in paragraph 2 under ‘Report on Other Legal and RegulatoryRequirements' section of our Report of even date to the members of Aarti IndustriesLimited on the accounts of the company for the year ended March 31 2020.

On the basis of such checks as we considered appropriate and according to theinformation and explanations given to us during the course of our audit we report that:

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets ;

(b) As explained to us fixed assets have been physically verified by the management atregular intervals; as informed to us no material discrepancies were noticed on suchverification;

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

(ii) The Management has been conducted physical verification of the inventories atreasonable intervals except inventories lying at the third parties; confirmation of suchstock has been obtained. No major discrepancies were found in the physical verification.All minor discrepancies have been properly dealt with in books of accounts.

(iii) According to the information and explanation given to us the Company has grantedunsecured loans to its subsidiary company covered in the register maintained underSection 189 of the Companies Act 2013

a) In our opinion the terms and conditions of the granted loans are not prejudicial tothe company's interest; b) The schedule of repayment of principal and payment of interesthas been stipulated and repayments or receipts are regular;

(iv) In our opinion and according to the information and explanations given to us inrespect of loans investments guarantees and security provisions of Section 185 andsection 186 of the Companies Act 2013 have been complied with.

(v) The Company has not accepted any deposits from the public covered under Section 73to 76 of the Companies Act 2013.

(vi) The company has maintained cost records under subSection (1) of Section 148 of theAct. We have not carried out any detailed examination of such records.

(vii) According to the information and explanations given to us and based on therecords of the company examined by us

(a) The company has generally been regular in depositing the undisputed statutory duesincluding

Provident Fund Employees' State Insurance

Income-tax Goods & Service Tax Custom Duty and other material statutory dues asapplicable with the appropriate authorities in India ;

According to the information and explanation given to us no undisputed amount payablein respect of Provident Fund Employees' State Insurance Income-tax Goods & ServiceTax Custom Duty and other material statutory dues were in arrears as at March 31 2020for a period of more than six months from the date they become payable.

(b) According to the information and explanations given to us and based on the recordsof the company examined by us there are no dues of Income Tax Goods & Service Taxand Customs Duty which have not been deposited on account of any disputes.

Nature of Tax /Duty Amount Rs Crores Period Forum where dispute is pending
Central Excise Customs Duty Service 37.43 FY 2001-02 to 2016-17 Commissionerate
Tax Interest & Penalty 29.95 Appellate Authorities and Tribunals

(viii) In our opinion and according to the information and explanations given to usand based on our examination of the records the Company has not defaulted in repayment ofloans or borrowings to a financial institution bank government or dues to debentureholders.

(ix) In our opinion and according to the information and explanations given to us theCompany does not raise money by way of initial public offer or further public offer andterm loans other than for what it was purposes.

(x) During the course of audit we have not noticed any fraud by the company or anyfraud on the company by its officers or employees during the year.

(xi) In our opinion the company has been paid or payable managerial remuneration inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith Schedule V of the Act. If not state the amount involved and steps taken by theCompany for securing refund for the same.

(xii) The nature of business is not related to Nidhi Company; hence this clause is notapplicable.

(xiii) In our opinion and according to the information and explanations given to usand based on our examination of the records of the Company all transactions with relatedparties are in compliances with the section 177 & 188 of the Companies Act 2013 anddetails have been disclosed in the Standalone Financial Statements as required by theapplicable Accounting Standards.

(xiv) According to the information and explanations given to us and based on ourexamination of the records of the

Company the Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year.

(xv) The company has not entered into any non-cash transactions with directors orpersons connected with him.

(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.

For Kirtane & Pandit LLP
Chartered Accountants
FRN: 105215W/W100057
Milind Bhave
Partner
Place: Mumbai M. No. 047973
Date: May 25 2020 UDIN : 20047973AAAABT9861

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