To the Members of Alembic Pharmaceuticals Limited
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of Alembic Pharmaceuticals Limited("the Company") which comprise the Balance Sheet as at 31st March2019 and the statement of profit and loss (including other comprehensive income)statement of changes in equity and statement of cash flows for the year ended and notesto the standalone financial statements including a summary of significant accountingpolicies and other explanatory information.
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 true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31st March 2019 and its profit changesin equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of thestandalone Financial Statements section of our report. We are independent of the Companyin accordance 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 judgement 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. We have determined the following matter as Key AuditMatter/s for the year.
1. Provision for return of non-saleable goods (Expiry Breakage and Spoilage) in themarket in India This is considered as key audit matter in view of significant estimatesand judgements made by the management for recognition and measurement for the same.
The Company under the prevailing trade practice has an obligation to accept returnsof expiry breakage and spoilage (EBS) products from the stockiest (customers) in India.The methodology and assumptions used to estimate the accruals of EBS are monitored andadjusted regularly by the management in the light of the obligations historical trendspast experience and prevailing market conditions.
The Company makes provision for accrual of EBS estimated in future out of the saleseffected during the current period. The said provision is used for settling claims made bythe customers in future. Actual returns on account of EBS can vary materially from periodto period based upon actual sales volume product mix etc.
Refer accounting policy stated at 2.16 and note 27(11) in the standalone financialstatements.
Principal Audit Procedures
We verified management's calculations in respect of estimate made by the managementtowards provision for accruals of EBS. We have examined the methodology and theassumptions made by the management while making this provision.
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Board's Report and Annexures theretoand Report on Corporate Governance but does not include the standalone financialstatements 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 knowledgeobtained in the audit or otherwise appears to be materially misstated.
We have been provided the aforesaid reports and based on the work we have performed wedid not observe any material misstatement of this other information and accordingly wehave nothing to report in this regard.
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 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 changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theaccounting Standards 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 the Board of Directors is responsiblefor assessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless the Board of Directors either intends to liquidate the Company or tocease operations or has no realistic 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 financial statements.
As part of an audit in accordance with SAs 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 on whetherthe company has internal financial controls system with reference to 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 auditor's 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 ourauditor's 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 auditor's report unless law or regulation precludes public disclosure about thematter 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.
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 Companies Act 2013 we give in the Annexure A a statement on the matters specifiedin paragraphs 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 Cash Flow Statement dealt with by thisReport are in agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in termsof Section 164(2) of the Act.
(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 B".
(g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended in our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its Directors during the year is in accordance withthe provisions of section 197 of the Act and is not in excess of the limit laid down underthis section.
(h) 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 27(2)(ii) to the standalonefinancial statements;
ii. The Company did not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company
(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory RequirementsRssection of our report of even date to the Members of Alembic Pharmaceuticals Limited)
(i) (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets i.e. Property Plant and Equipment(PPE).
(b) These fixed assets (PPE) have been physically verified by the management during theyear as per the phased programme of physical verification of fixed assets (PPE). Asinformed to us the programme is such that all the fixed assets (PPE) will get physicallyverified once in three year time. In our opinion the same is reasonable having regard tothe size of the Company and the nature of its fixed assets (PPE). No materialdiscrepancies were noticed on such verification.
(c) The title deeds of immovable properties are held in the name of the Company exceptfor Land having book value of '1.19 crores still being held in the names of erstwhiledemerged companies.
(ii) Physical verification of inventory has been conducted at reasonable intervals bythe management and no material discrepancies were noticed on such physical verification.
(iii) The Company has not granted any secured or unsecured loans to companies firmslimited liability partnerships or other parties covered in the register maintained undersection 189 of the Companies Act 2013. Therefore the requirements of sub-clause (a) (b)and (c) of clause (iii) are not applicable to the Company.
(iv) In respect of loans investments guarantees and security provisions of section185 and 186 of the Companies Act 2013 have been complied with.
(v) The Company has not accepted any deposits during the year. Therefore the questionof complying with directives issued by the Reserve Bank of India and the provisions ofsections 73 to 76 or any other relevant provisions of the Companies Act 2013 and therules framed thereunder does not arise.
(vi) The Central Government has specified the maintenance of cost records undersub-section (1) of section 148 of the Companies Act 2013. Such accounts and records havebeen made and maintained by the Company.
(vii) (a) The Company is generally regular in depositing undisputed statutory duesincluding provident fund employeesRs state insurance income tax duty of customs goodsand service tax (GST) cess and any other statutory dues to the appropriate authorities.There were no undisputed amounts payable in respect of these dues in arrears as at 31stMarch 2019 for a period of more than six months from the date they became payable.
(b) Dues of income tax or sales tax or service tax or duty of customs or duty of exciseor value added tax or goods and service tax (GST) that have not been deposited on accountof any dispute are as under:
|Nature of dues ||Amount not deposited (Rs. In Crores) ||Forum where dispute is pending ||Period |
|Sales Tax interest and penalty ||0.13 ||High Court ||1999-2000 |
| ||1.64 ||Asst. Commissioner Demand ||2003-04 |
| ||@ ||Additional Commissioner ||2004-05 |
| ||0.02 ||Revisional Board (Tribunal) ||2006-07 |
| ||0.21 ||Jt. Commissioner Appeals ||2013-14 |
| ||0.08 ||Jt. Commissioner Appeals ||2006-07 |
| ||0.08 ||Tribunal ||2009-10 |
| ||0.02 ||Additional Commissioner ||1st April2006 to 30th Nov2008 |
| ||0.15 ||Additional Commissioner ||2007-08 |
| ||0.11 ||Deputy Commissioner II ||2006-07 |
|Central Sales Tax ||0.02 ||Addl. Commissioner Sales Tax ||1st April2006 to 30th Nov2008 |
| ||0.01 ||Jt. Commissioner Appeals ||2006-07 |
| ||0.03 ||Jt. Commissioner Appeals ||2010-11 |
|Entry Tax ||0.03 ||Revisional Authority ||2013-14 |
|Professional Tax ||0.05 ||Jt. Commissioner ||2014-15 |
|Excise duty interest & penalty ||2.14 ||CESTAT ||2005-06 |
| ||0.10 ||CESTAT ||2011-12 |
| || ||Remand Back ||2007-08 |
| ||0.02 ||CESTAT ||1998-99 |
| ||# ||Commissioner Appeal ||2009-10 |
| ||0.50 ||Supreme Court ||2005-06 |
| ||1.21 ||Supreme Court ||2005-06 |
| ||# # ||CESTAT ||2008-09 |
| ||0.01 ||CESTAT ||2010-11 |
| ||1.02 ||CESTAT ||2006-11 |
| ||0.24 ||Commissioner Appeals ||2013-14 |
| ||0.04 ||Commissioner Appeals ||2013-14 |
| ||0.03 ||CESTAT ||2012-13 |
| ||$$ ||Commissioner Appeals ||2011-12 |
| ||0.01 ||Commissioner Appeals ||2006-11 |
| ||AA ||Commissioner (Appeals) ||2008-09 |
| || |
|Commissioner (Appeals) ||2009 |
| ||** ||Commissioner (Appeals) ||2009-10 |
| ||+ ||Commissioner (Appeals) ||2007-08 |
@ Rs. 44830/-
@@ Rs. 16091/-
# Rs. 35000/-
## Rs. 55306/- $$
Rs. 13588/- AA
+ Rs. 11316/-
(viii) The Company has not defaulted in repayment of loans or borrowings to a financialinstitution bank government or dues to debenture holders.
(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments). The term loans raised during the year have beenapplied for the purpose for which they were raised.
(x) Any fraud by the Company or any fraud on the Company by its officers or employeeshas not been noticed or reported during the year.
(xi) Managerial remuneration has been paid or provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct.
(xii) The Company is not a Nidhi Company and therefore the compliance requirementsrelevant to a Nidhi Company are not applicable.
(xiii) All transactions with related parties are in compliance with section 177 and 188of the Companies Act 2013 where applicable and the details have been disclosed in thestandalone financial statements as required by the applicable accounting standards.
(xiv) The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review thereforethe compliance of the requirement of section 42 of the Companies Act 2013 are notapplicable.
(xv) Pursuant to the provisions of section 192 of the Companies Act 2013 the Companyhas not entered into any non-cash transactions with directors or persons connected withhim/her.
(xvi) The Company is not required to be registered under section 45-1(A) of the ReserveBank of lndia Act 1934.
(Referred to in paragraph 2(f) under 'Report on Other Legal and RegulatoryRequirementsRs section of our report of even date to the Members of AlembicPharmaceuticals Limited)
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 over financial reporting of AlembicPharmaceuticals Limited ("the Company") as of 31st March 2019 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 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 withreference to the standalone financial statements of the Company that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under theCompanies Act 2013.
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 prescribed under section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether 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 included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgement including the assessment of the risks of materialmisstatement of the standalone financial statements 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 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 reasonable assurance that transactions are recorded as necessary to permitpreparation of standalone financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the company's assets that could have a material effecton 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 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.
In our opinion the Company has in all material respects an internal financialcontrols system with reference to the standalone financial statements of the Company andsuch internal financial controls over financial reporting were operating effectively as at31st March 2019 based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India.
For K. S. Aiyar & Co.
Firm's Registration No. 100186W
Rajesh S. Joshi
Date: 8th May 2019