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Aarti Industries Ltd.

BSE: 524208 Sector: Industrials
NSE: AARTIIND ISIN Code: INE769A01020
BSE 00:00 | 19 Aug 814.75 -16.50
(-1.98%)
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HIGH

839.85

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NSE 00:00 | 19 Aug 815.00 -16.05
(-1.93%)
OPEN

833.50

HIGH

839.70

LOW

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OPEN 834.95
PREVIOUS CLOSE 831.25
VOLUME 56204
52-Week high 1168.40
52-Week low 669.00
P/E 22.51
Mkt Cap.(Rs cr) 29,535
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 834.95
CLOSE 831.25
VOLUME 56204
52-Week high 1168.40
52-Week low 669.00
P/E 22.51
Mkt Cap.(Rs cr) 29,535
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 IndustriesLimited ("the Company") which comprise the Balance Sheet as at March 312021and the statement of Profit and Loss (statement of changes in equity) and statement ofcash flows for the year then ended and notes to the Standalone Financial Statementsincluding a summary of significant accounting policies and other explanatory.

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid Standalone Financial Statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2021 and profit/loss changes in equity and itscash 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 Companies Act 2013. Our responsibilitiesunder those Standards are further described in the Auditor's Responsibilities for theAudit of the Standalone Financial Statements Section of our report. We are independent ofthe Company in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India together with the ethical requirements that are relevant to our auditof the Standalone Financial Statements under the provisions of the Companies Act 2013 andthe Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.

Key Audit Matters

Key Audit Matters are those matters that in our professional judgmentwere of most significance in our audit of the Standalone Financial Statements of thecurrent period. These matters were addressed in the context of our audit of the StandaloneFinancial Statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. Due to COVID-19 lockdown throughout the countryduring the year we have adopted alternative methodologies solutions in performing ouraudit procedures. We have determined the matters described below to the Key Audit Mattersto 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:
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.
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. b) We have carried out substantive audit procedures at financial and assertion level to verify the capitalization of asset as Property Plant and Equipment
c) 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.
Further technical complexities requires management to assess and make estimates/ judgments about capitalization estimated useful life impairment etc. which has material impact on Balance Sheet and operating results d) 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.
e) Due to pandemic restrictions physical verification on sample basis was not possible. We have relied on physical verification conducted by management and management representations.
Refer note 1 to financial statements f) We have verified the capitalization 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. 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.
Refer note 4 to financial statements d) Due to pandemic restrictions physical verification on sample basis was not possible. We have relied on physical verification conducted by management and management representations.
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. During the current financial year in respect of one long term contract the Company received termination intimation. On account of the termination the relevant remedies available to the Company triggered. Further in respect of other long term contracts estimated supplies 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. 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) Recognition and accuracy of compensation on account of termination intimation was verified with reference to the terms of contract under termination intimation.
d) The fairness of value reflected in financial statement was verified and tested.
Refer note 12 to financial statements e) Disclosure notes pertaining to said advances in financial statement was reviewed.

Information Other than the Standalone Financial Statements andAuditor's Report thereon

The Company's Board of Directors is responsible for thepreparation of the other information. The other information comprises the informationincluded in the Management Discussion and Analysis Board's Report with itsannexures but does not include Standalone Financial Statements and our auditor'sreport thereon.

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

In connection with our audit of the Standalone Financial Statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the Standalone Financial Statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially misstated.

If based on the work we have performed we conclude that there is amaterial misstatement of this information; we required to report that fact. We havenothing to report in this regard.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the mattersstated in Section 134(5) of the Companies Act 2013 ("the Act") with respect tothe preparation of these Standalone Financial Statements that give a true and fair view ofthe financial position financial performance (changes in equity) and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the accounting Standards specified under Section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateimplementation and maintenance of accounting policies; making judgments and estimates thatare reasonable and prudent; and design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statement that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the Standalone Financial Statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

The Board of Directors are also responsible for overseeing theCompany's financial reporting process.

Auditor's Responsibilities for the Audit of the Standalone FinancialStatements

Our objectives are to obtain reasonable assurance about whether theStandalone Financial Statements as a whole are free from material misstatement whetherdue 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 auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these Standalone Financial Statements.

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

• Identify and assess the risks of material misstatement of theStandalone Financial Statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

• Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3) (i) of the Companies Act 2013 we are also responsible for expressing ouropinion on whether the company has adequate internal financial controls system in placeand the operating effectiveness of such controls.

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

• Conclude on the appropriateness of management's use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the Standalone Financial Statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of theStandalone Financial Statements including the disclosures and whether the StandaloneFinancial Statements represent the underlying transactions and events in a manner thatachieves fair presentation.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the StandaloneFinancial Statements of the current period and are therefore the Key Audit Matters. Wedescribe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.

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 explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.

(b) 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 and the CashFlow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion the aforesaid Standalone Financial Statementscomply with the Accounting Standards specified under Section 133 of the Act read withRule 7 of the Companies (Accounts) Rules 2014.

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

(f) With respect to the adequacy of the internal financial controlsover financial reporting of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure A".

(g) With respect to the other matters to be included in theAuditor'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 theexplanations given to us:

i. The Company has disclosed the impact of pending litigations on itsfinancial position in its Standalone Financial Statements - Refer Note 25 to theStandalone Financial Statements;

ii. The Company has made provision as required under the applicablelaw or accounting standards for material foreseeable losses if any on long-termcontracts including derivative contracts.

iii. There has been no delay in transferring amounts required to betransferred to the 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 of the Companies Act 2013 we give in the "Annexure B" astatement on the matters specified in paragraphs 3 and 4 of the Order to the extentapplicable.

Annexure A to the Auditor's Report

Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financialreporting of Aarti Industries Limited ("the Company") as of March 31 2021 inconjunction with our audit of the Standalone Financial Statements of the Company for theyear ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting 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 safeguardingof its 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

Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with 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(1 o) of the Companies Act 2013 to theextent applicable to an audit of internal financial controls both applicable to an auditof Internal Financial Controls and both issued by the Institute of Chartered Accountantsof 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 aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the Standalone Financial Statements whether due tofraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Standalone Financial Statements for external purposes inaccordance with generally accepted accounting principles. A company's internal financialcontrol over financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions 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 withauthorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the company's assets that could have a material effect on the StandaloneFinancial Statements.

Inherent Limitations of Internal Financial Controls Over FinancialReporting

Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at March 31 2021 basedon the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.

Annexure B to the Auditor's Report

Annexure B referred to in paragraph 2 under ‘Report on Other Legaland Regulatory Requirements' section of our Report of even date to the members of AartiIndustries Limited on the accounts of the company for the year ended March 31 2021.

On the basis of such checks as we considered appropriate and accordingto the information and explanations given to us during the course of our audit we reportthat:

(i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets;

(b) As explained to us fixed assets have been physically verified bythe management at regular intervals; as informed to us no material discrepancies werenoticed on such verification;

(c) According to the information and explanation given to us and on thebasis of examination of the records of the Company the title deeds of immovableproperties are held in the name of the Company.

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

(iii) According to the information and explanation given to us theCompany has granted unsecured loans to its subsidiary company covered in the registermaintained under Section 189 of the Companies Act 2013

a) In our opinion the terms and conditions of the granted loans arenot prejudicial to the company's interest;

b) The schedule of repayment of principal and payment of interest hasbeen stipulated and repayments or receipts are regular;

(iv) In our opinion and according to the information and explanationsgiven to us in respect of loans investments guarantees and security provisions ofSection 185 and section 186 of the Companies Act 2013 have been complied with.

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

(vi) The company has maintained cost records under sub- section (1) ofSection 148 of the Act. We have not carried out any detailed examination of such records.

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

(a) The company has generally been regular in depositing the undisputedstatutory dues including Provident Fund Employees' State Insurance Income-taxGoods & Service Tax Custom Duty and other material statutory dues as applicablewith the appropriate authorities in India;

According to the information and explanation given to us no undisputedamount payable in respect of Provident Fund Employees' State Insurance Income-taxGoods & Service Tax Custom Duty and other material statutory dues were in arrears asat March 312021 for a period of more than six months from the date they become payable.

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

Nature of Tax /Duty Amount Crores Period Forum where dispute is pending
Central Excise Customs Duty Service Tax 31.69 FY 2001-02 to 2019-20 Commissionerate
Goods & Service Interest & Penalty 36.41 Appellate Authorities and Tribunals

(viii) In our opinion and according to the information andexplanations given to us and based on our examination of the records the Company has notdefaulted in repayment of loans or borrowings to a financial institution bank governmentor dues to debenture holders.

(ix) In our opinion and according to the information and explanationsgiven to us the Company does not raise money by way of initial public offer or furtherpublic offer and term loans other than for what it was purposes.

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

(xi) In our opinion the company has been paid or payable managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V of the Act. If not state the amount involved and stepstaken by the Company for securing refund for the same.

(xii) The nature of business is not related to Nidhi Company; hencethis clause is not applicable.

(xiii) In our opinion and according to the information andexplanations given to us and based on our examination of the records of the Company alltransactions with related parties are in compliances with the section 177 & 188 of theCompanies Act 2013 and details have been disclosed in the Standalone Financial Statementsas required by the applicable Accounting Standards.

(xiv) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year.

(xv) The company has not entered into any non-cash transactions withdirectors or persons connected with him.

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

For Kirtane & Pandit LLP
Chartered Accountants
Firm's Registration No.105215W/W100057
Milind Bhave
Partner
Place: Mumbai M. No. 047973
Date: May 18 2021
UDIN: 21047973AAAABF5304

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