To the Members of Alembic Pharmaceuticals Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of AlembicPharmaceuticals Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2021 the Statement of Profit and Loss including Other Comprehensive Income theStatement of Changes in Equity and the Statement of Cash Flows for the year then ended andnotes to the standalone financial statements including a summary of significant accountingpolicies and other explanatory information (hereinafter referred to as "thestandalone financial statements").
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 Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards specified under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2021 and total comprehensiveincome (comprising of profit and other comprehensive income) changes in equity and itscash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditors'Responsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules made thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of these standalone financial statements of the current year.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. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Sr. No. Key Audit Matters ||How our audit addressed the key audit matters |
|1 Provision for return of non-saleable goods (Expiry Breakage and Spoilage) in the market in India: ||Our audit procedures consisted of following |
|The Company under the prevailing trade practice has an obligation to accept returns of expiry breakage and spoilage (EBS) products from the customers in India. This results in deductions to gross amounts invoiced. The methodology and assumptions used to estimate the accruals of EBS are monitored and adjusted regularly by the management in the light of the obligations historical trends past experience and prevailing market conditions. ||1. Assessed the appropriateness of the accounting policy in respect of recognition of provision for accrual of EBS estimated in future out of the sales effected during the current period |
|This is considered as key audit matter in view of significant estimates and judgements made by the management for recognition and measurement for the same. ||2.Tested the operating effectiveness of controls over Company's review of recognition of provision for EBS |
| ||3.Obtained management 's calculations for accruals and assessed management analysis of the historical pattern of accruals to validate management's assumption for creation of such provisions |
| ||4. Examined the historical trend of the Company's estimates to assess the assumptions and judgements used by the Company in accrual of provisions. |
| ||Conclusion: |
| ||We found that the calculation and estimates to assess the assumptions and Judgements made by the company are appropriate. |
Information Other than the Standalone Financial Statements and Auditors' 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 Board'sReport including Annexures to Board's Report and Management Discussion and Analysis butdoes not include the standalone financial statements and our auditors' report thereon. Theabove-referred information is expected to be made available to us after the date of thisaudit report.
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 identified above when it becomes available and in doingso consider whether the other information is materially inconsistent with the standalonefinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
When we read the information if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance andtake appropriate actions necessitated by the circumstances & the applicable laws andregulations.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements 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 is also responsible for overseeing the Company's financialreporting process.
Auditors' 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 auditors' 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 part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism 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 Act we are also responsible for expressing our opinion on whether the Companyhas adequate internal financial controls with reference to standalone financial statementsin place and the operating 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 auditors' report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditors' report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
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 identify 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 statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors' report unless law or regulation precludes public disclosure about thematters or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
The comparative financial information included in these standalone financialstatements are based on the previously issued standalone financial statements for theyear ended March 31 2020 which were audited by the predecessor auditors who vide theirreport dated May 22 2020 expressed an unmodified opinion. Our Opinion is not modified inrespect of this matter.
Report on Other Legal and Regulatory Requirements
1. 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.
2. 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 including other comprehensiveincome the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis Report are in agreement with the books of account;
d. in our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under Section 133 of the Act;
e. on the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2021 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 with reference tostandalone financial statements of the Company and the operating effectiveness of suchcontrols refer to our separate report in "Annexure B";
g. with respect to the other matters to be included in the Auditors' Report inaccordance with the requirements of section 197(16) of the Act as amended:
In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act; and
h. with respect to the other matters to be included in the Auditors' 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 29.2 to the standalonefinancial statements;
ii. the Company has made provision as required under the applicable law or Indianaccounting standards for material foreseeable losses if any on long-term contractsincluding derivative contracts;
iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
For K. C. Mehta & Co.
Chartered Accountants Firm's
Vishal P. Doshi
Partner Membership No. 101533
Date: May 4 2021
Annexure A to the Independent Auditors' Report
(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements'section of our report of even date to the members of Alembic Pharmaceuticals Limited onthe standalone financial statements for the year ended March 31 2021)
i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner over a period of three years. Inaccordance with this programme certain fixed assets were verified during the year and nomaterial discrepancies were noticed on such verification. In our opinion this periodicityof physical verification is reasonable having regard to the size of the Company and thenature of its assets.
(c) According to the information and explanations given to us and on the basis of ourexamination of the registered sale deed/conveyance deed provided to us the title deeds ofimmovable properties are held in the name of the Company. In respect of immovableproperties of land that have been taken on lease and disclosed as property plant andequipments in the financial statements the lease agreements are in the name of theCompany where the Company is the lessee in the agreement.
ii. The Inventories except for goods-in-transit have been physically verified by themanagement during the year and in our opinion the frequency of verification isreasonable. As explained to us there were no material discrepancies on physicalverification of inventory as compared to the book records.
iii. The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Companies Act 2013 and therefore reporting under clause (iii) (a) toclause (iii) (c) of the Order is not applicable to the Company.
iv. The Company has not granted any loans or provided any guarantees or security to theparties covered under section 185 of the Act. In our opinion and according to theinformation and explanation given to us the Company has complied with the provisions ofsection 186 of the Act in respect of the Investments made.
v. According to the information and explanations given to us the Company has notaccepted any deposits during the year from the public within the meaning of provisions ofsection 73 to 76 of the Act and the rules framed thereunder or under the directivesissued by the Reserve Bank of India and therefore reporting under clause (v) of the Orderis not applicable to the Company.
vi. We have broadly reviewed the books of account maintained by the Company pursuant tothe order of the Central Government for maintenance of cost records under section 148(1)of the Companies Act 2013 and are of the opinion that prima facie the prescribed recordshave been made and maintained. We have however not made a detailed examination of therecords with a view to determining whether they are accurate or complete.
vii. (a) In our opinion and according to the information and explanations given to usthe Company has been regular in depositing with appropriate authorities undisputedstatutory dues including provident fund income-tax duty of customs cess goods andservice tax and any other statutory dues applicable to it. Further no undisputed amountspayable in respect of income tax duty of customs duty of excise goods and service taxcess and other statutory dues were in arrears as at 31st March 2021 for aperiod of more than six months from the date they become payable.
(b) According to the information and explanations given to us there are no disputeddues in respect of value added tax income tax goods and service tax and duty of customswhich have not been deposited. The following are the particulars of sales tax centralsales tax entry tax professional tax and excise duty as at 31st March 2021which have not been deposited on account of dispute:
|Name of the statute ||Nature of disputed dues ||Amount (INR in Crores) ||Period to which the amount relates ||Forum where pending |
|Sales Tax ||Sales Tax ||0.13 ||1999-2000 ||High Court |
| ||Sales Tax ||1.64 ||2003-04 ||Assistant Commissioner |
| ||Sales Tax ||0.004 ||2004-05 ||Additional Commissioner |
| ||Sales Tax ||0.08 ||2006-07 ||Joint Commissioner Appeals |
| ||Sales Tax ||0.08 ||2009-10 ||Maharashtra Tribunal |
| ||Sales Tax ||0.02 ||1st April 2006 to 30th November 2008 ||Additional Commissioner |
| ||Sales Tax ||0.16 ||2015-16 ||Revisional Authority |
|Central Sales Tax ||Central Sales Tax ||0.02 ||1st April 2006 to 30th November 2008 ||Additional Commissioner Sales tax |
| ||Central Sales Tax ||0.01 ||2006-07 ||Joint Commissioner Appeals |
| ||Central Sales Tax ||0.03 ||2010-11 ||Joint Commissioner Appeals |
| ||Central Sales Tax ||0.11 ||2006-07 ||Deputy Commissioner |
|Entry Tax ||Entry Tax ||0.03 ||2013-14 ||Revisional Authority |
|Professional tax ||Professional tax ||0.05 ||2014-15 ||Joint Commissioner |
|Central Excise Act 1944 ||Excise duty ||0.24 ||2013-14 ||Commissioner appeals |
viii. In our opinion and according to the information and explanations given to us theCompany has not defaulted in repayment of dues to banks financial institutions ordebenture holders. The company has not taken any loans from Government.
ix. In our opinion and according to information and explanation given to us the termloans taken by the Company have been applied for the purpose for which they were raised.The Company has not raised any money by way of initial public offer or further publicoffer (including debt instruments) during the year.
x. To the best of our knowledge and according to information and explanations given tous no fraud by the company or on the Company by its officers or employees has beennoticed or reported during the year.
xi. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V to the Act.
xii. In our opinion the Company is not a Nidhi company and therefore reporting underclause (xii) of the Order is not applicable to the Company.
xiii. In our opinion and according to the information and explanations given to ustransactions with the related parties are in compliance with sections 177 and 188 of theAct where applicable and the details of such transactions have been disclosed in thefinancial statements as required by the applicable Indian accounting standards.
xiv. The Company has made Qualified Institutions Placement of equity shares during theyear and in our opinion the provisions of section 42 of the Act have been complied with.In our opinion and according to the information and explanations given to us the amounthas been used for the purposes for which they were raised.
xv. I n our opinion and according to the information and explanations given to us theCompany has not entered into non-cash transactions with directors or persons connectedwith him. Accordingly reporting under clause (xv) of the Order are not applicable to theCompany.
xvi. I n our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934.
For K. C. Mehta & Co.
Chartered Accountants Firm's
Vishal P. Doshi
Partner Membership No. 101533
Date: May 4 2021
Annexure B to the Independent Auditors' Report
(Referred to in paragraph 2(f) under 'Report on Other Legal and RegulatoryRequirements' section of our report of even date to the members of Alembic PharmaceuticalsLimited)
Report on the Internal Financial Controls under Clause (i) of sub-section 3 of Section143 of the Companies Act 2013 ("the Act").
We have audited the internal financial controls with reference to financial statementsof ALEMBIC PHARMACEUTICALS LIMITED ("the Company") as of March 31 2021 inconjunction with our audit of the financial statements of the Company for the year endedon that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over 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.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013 tothe extent applicable to an audit of internal financial controls both applicable to anaudit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wasestablished and maintained and if such controls operated effectively in aU materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemwith reference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
A Company's internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control withreference to financial statements 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 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 with reference to financialstatements
Because of the inherent [imitations of internal financial controls with reference tostandalone financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to standalone financial statements to future periods are subjectto the risk that the internal financial control with reference to standalone financialstatements may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respect an adequate internal financialcontrol system over financial reporting and such internal financial control over financialreporting were operating effectively as at March 31 2021 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of Interna[ contro[ stated in the Guidance Note on audit of Internal FinancialControl over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
For K. C. Mehta & Co.
Chartered Accountants Firm's Registration No.106237W
Vishal P. Doshi
Membership No. 101533
Date: May 4 2021