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Andhra Petrochemicals Ltd.

BSE: 500012 Sector: Industrials
NSE: ANDHRAPET ISIN Code: INE714B01016
BSE 00:00 | 15 Nov 34.55 0.15
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34.25

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35.65

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NSE 05:30 | 01 Jan Andhra Petrochemicals Ltd
OPEN 34.25
PREVIOUS CLOSE 34.40
VOLUME 29561
52-Week high 82.00
52-Week low 34.00
P/E 6.01
Mkt Cap.(Rs cr) 294
Buy Price 34.55
Buy Qty 599.00
Sell Price 34.90
Sell Qty 200.00
OPEN 34.25
CLOSE 34.40
VOLUME 29561
52-Week high 82.00
52-Week low 34.00
P/E 6.01
Mkt Cap.(Rs cr) 294
Buy Price 34.55
Buy Qty 599.00
Sell Price 34.90
Sell Qty 200.00

Andhra Petrochemicals Ltd. (ANDHRAPET) - Auditors Report

Company auditors report

To

The Members of

THE ANDHRA PETROCHEMICALS LIMITED

TANUKU.

Report on the Audit of the Financial Statements

Opinion

We have audited the accompanying financial statements of THE ANDHRA PETROCHEMICALSLIMITED ("the Company") which comprise the Balance Sheet as at March 312019 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Statement of Cash Flows for the year ended on thatdate and a summary of the significant accounting policies and other explanatoryinformation (hereinafter referred to as "the financial statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the accompanying financial statements give the information required by theCompanies Act 2013 ("the Act") in the manner so required and give a true andfair view in conformity with the Indian Accounting Standards prescribed under section 133of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended("Ind AS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at March 312019 the profit and total comprehensiveincome changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) specified under section 143(10) of the Act. Our responsibilities underthose Standards are further described in the Auditor's Responsibilities for the Auditof the 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 (ICAI) together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Act and the Rules made thereunder and wehave fulfilled our other ethical responsibilities in accordance with these requirementsand the ICAI's Code of Ethics. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion on the financialstatements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.

Sl. No. Key Audit Matter How our audit addressed the Key Audit Matter
1 Adoption of Ind AS 115 "Revenue from Contracts with Customers"
Accuracy of recognition measurement presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 "Revenue from Con tracts with Customers" (new revenue accounting standard) We assessed the various Company's process contracts entered with various customers to identify the impact of adoption of the new revenue accounting standard.
Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
The application of the above new revenue accounting standard involves certain key judgements relating to identification of distinct performance obligations in the contract determination of transaction price of the identified performance obligations the appropriateness of the basis used to measure revenue recognized over a period. Additionally new revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date. Evaluated the design of internal controls relating to implementation of the new revenue accounting standard.
Selected a sample of continuing and new contracts and tested the operating effectiveness of the internal controls relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation re-performance and inspection of evidence in respect of operation of these controls.
Compared these performance obligations with that identified and recorded by the Company.
Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable consideration.
Refer Note 2.24 to the Financial Statements Performed analytical procedures for reasonableness of revenues disclosed by type and service offerings.
We reviewed the collation of information and the logic of the report generated from the budgeting system used to prepare the disclosure relating to the periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
2. Valuation of Investments in Unquoted Equity Shares of Andhra Pradesh Gas Power Corporation Ltd. (APGPCL)
The valuation of the investments involves judgement and continues to be an area of inherent risk because quoted prices are not readily available. We assessed the managements' approach to valuation for these investments by performing the following procedures:
As per the MOU between the APGPCL and its share- holders each shareholder is entitled to receive power generated in proportion to its shareholding at cost of generation plus 20% of its overheads which is substantially lower that the price charged by DISCOMs. We have verified data inputs used in the valuation models based on historical trends.
We evaluated the methodology and assumptions used by management including reasonableness of the discounted cash flows growth rate and discount rate applied by comparing it with the Indian Government Bond rate for a similar period.
In the absence of any transfer of shares of APGPCL during the year under audit the fair value of the shares has been determined by using "discounted cash flow" method in respect of savings in cost of power in future years. We tested the calculation of the fair value based on the assumptions applied.
We found the disclosures in the financial statements to be appropriate.
Refer Note 3.2 to the Financial Statements Conclusion: Based on the work performed and the evidence obtained we consider the methodology and assumptions used by management to be appropriate.
3 Estimation of decommissioning and restoration provisions
The determination and valuation of provision is highly judgmental by its nature as they are calculated based on assumptions that are impacted by future activities and the legislative environment in which the company operates. Our audit procedures to assess the decommissioning provision included the following:
Refer Note 2.34 to the Financial Statements We assessed the valuation methodology.
We evaluated the reasonableness of key assumptions applied by the management to calculate new and existing provisions.
We tested the calculation of the provisions.
We checked the accuracy and relevance of the input data used.
We found the disclosures in the financial statements to be appropriate.
Conclusion: Based on the work performed we found management's assessment to be reasonable based on available evidence.
4 Uncertainty regarding the extension of land lease period.
The uncertainty of extension of lease period of the Land may have an effect on the going concern status of the Company. Our audit procedures included the following:
The company has initiated the process of renewal of the lease of the land on which the plant is located with Visakhapatnam Port Trust (VPT) which will expire on 26.06.2019. We have gone through the terms and conditions of the VPT's Land renewal lease policy "e-Tender cum e-Auction" for the allotment of the Land on long term lease. We evaluated the reasonableness of the managements' judgment that the lease period will be extended for further period of 30 years based on the facts that the company has absolute right to take over the land provided they have to match the highest bid.
There is a possibility of existence of a competitor to the company as per the procedure to be adopted by VPT as per its "land lease extension policy." Further the chances of bidding by the competitor are very insignificant due to the fact that the successful bidder has to remit the value of the structures
As the company expects that the lease will be extended for at least 30 year in its favour the unexpired period of lease for computing the provision for dismantling costs resultant depreciation & amortization of various fixed assets has been considered as 30 years. to the company in addition to the lease rentals and security deposit. Conclusion: We found management's judgment to be reasonable based on available evidence.

Information Other than the 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 including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to be materially misstated.

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

Management's Responsibility for the Financial 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 financial statements that givea true and fair view of the financial position financial performance total comprehensiveincome changes in equity and cash flows of the Company in accordance with the Ind AS andother accounting principles generally accepted in India. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.

In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

The Board of Directors is responsible for overseeing the Company's financial reportingprocess.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these 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 financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.

Obtain an understanding of internal financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness 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 basis ofaccounting 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions 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 financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.

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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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 in terms of Section 143 (11) of the Act we give in"Annexure- A" a statement on the matters specified in paragraphs 3 and 4 of theOrder.

2. As required by Section 143(3) of the Act based on our audit 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 Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of account.

d) In our opinion the aforesaid financial statements comply with the Ind AS specifiedunder Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.

e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 312019 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 B". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.

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:

The company has neither paid nor provided any remuneration to any of the Directors ofthe company. Accordingly the question of reporting under the provisions of section 197(16)of the Act does not arise.

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 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements.

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. The company has obtained a demand draft favoring "Investor Education andProtection Fund" for र41.87 Lakhs on 20.11.2018 towards unpaid dividends for theyear 2010-11 which were to be remitted to the fund on that date and remitted the same on13th May 2019.

For C V RAMANA RAO & CO
Chartered Accountants
Place : Visakhapatnam Firm Registration Number: 002917S
Date : 25.05.2019 (KATYAYANI K)
Partner
Membership Number: 225030

ANNEXURE-A TO THE INDEPENDENT AUDITORS' REPORT

The Annexure A referred to in our Independent Auditor's report of even date to themembers of THE ANDHRA PETROCHEMICALS LIMITED TANUKU for the year ended 31 March 2019. Wereport that:

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

b) The fixed assets have been physically verified by the management during the year.According to the information furnished to us no material discrepancies have been noticedon such verification.

c) The title deeds in respect of all immovable properties are held in the name of thecompany.

ii) Physical verification of inventory has been conducted during the year by themanagement at reasonable intervals. The discrepancies noticed on such verification betweenthe physical stocks and the book records were not material.

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. Consequently clauses 3 (iii) (a) (b) and (c) ofthe Order are not applicable.

iv) The company has neither given any loans to the directors or any other persons inwhom the director(s) is interested nor given/provided any guarantee/security in connectionwith any loan taken by directors or such other persons as per the provisions of section185 of the Companies Act 2013. The investment made by the company in an earlier year doesnot exceed the limits prescribed under section 186 of the Companies Act 2013.

v) The Company has not accepted any deposits from the public. Consequently the clause3(v) of the order is not applicable to the Company.

vi) We have broadly reviewed the books of account relating to materials labour andother items of cost maintained by the Company pursuant to the Rules made by the CentralGovernment for the maintenance of cost records under sub-section (1) of section 148 of theCompanies Act 2013 and we are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained. However we have not made a detailed examination ofthe records.

vii) a) According to the information and explanations given to us and on the basis ofexamination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of customs duty of excise valueadded tax cess and other material statutory dues have been regularly deposited during theyear by the Company with the appropriate authorities.

According to the information and explanations given to us no undisputed amounts arepayable in respect of income tax sales tax service tax duty of customs duty of excisevalue added tax or cess and other material statutory dues which were in arrears as at 31stMarch 2019 for a period of more than six months from the date they became payable.

b) As at 31st March 2019 there have been no disputed dues which have not beendeposited with the respective authorities in respect of Income tax Service tax duty ofcustoms duty of excise value added tax and Cess except the following:

Sr. No. Name of the Statute Nature of the Dues Amount * (र in lakhs) Period to which the amount relates Forum where dispute is pending
1. The Income Tax Act 1961 Income Tax 3.80 Assessment Year 2008-09 Commissioner of Income Tax (Appeals) Rajahmundry.
2. The Income Tax Act 1961 Income Tax 2.21 Assessment Year 2009-10 Commissioner of Income Tax (Appeals) Rajahmundry.

*Net of Pre deposits made.

viii) The Company has not defaulted in repayment of any loan installments in respect ofterm loans from financial institutions and banks.

ix) In our opinion the Term Loans obtained in earlier years have been applied for thepurposes for which they were raised.

x) According to the information and explanations given to us no fraud on or by theCompany has been noticed or reported during the course of our audit.

xi) The company has neither paid nor provided for any managerial remuneration duringthe financial year under report. Consequently the clause 3(xi) of the order is notapplicable.

xii) In our opinion the company is not a Nidhi Company. Consequently the clause 3(xii)of the order is not applicable.

xiii) According to the information and explanations given to us and on overallexamination of the records of the Company we report that all transactions with relatedparties are in compliance with the provisions of sections 177 and 188 of the CompaniesAct 2013 and the related party disclosures as required by relevant Indian AccountingStandards are disclosed in the financial statements.

xiv) The Company has not made any preferential allotment or private placement of sharesor fully/partly convertible debentures during the year under review. Consequently theclause 3(xiv) of the order is not applicable.

xv) The Company has not entered into any non cash transactions with the directors orpersons connected with them during the year under report. Consequently the clause 3(xv) ofthe order is not applicable.

xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934. Consequently the clause 3(xvi) of the order is not applicable.

For C V RAMANA RAO & CO
Chartered Accountants
Place : Visakhapatnam Firm Registration Number: 002917S
Date : 25.05.2019 (KATYAYANI K)
Partner
Membership Number: 225030

Annexure "B" to the Independent Auditors' Report

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

We have audited the internal financial controls over financial reporting of THEANDHRA PETROCHEMICALS LIMITED ("the Company") as of 31st March 2019 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 Board of directors of the company is responsible for establishing and maintaininginternal financial controls 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 ('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.

Auditor's Responsibility

Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls over FinancialReporting (the "Guidance Note") issued by ICAI and the Standards on Auditingprescribed under section 143(10) of the Companies Act 2013 to the extent applicable toan audit of internal financial controls. Those Standards and the Guidance Note requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting was established and maintained and if such controls operated effectively in allmaterial 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 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 Ind AS 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 the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of Ind AS 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 ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the 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.

Opinion

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at 31 March 2019 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

For C V RAMANA RAO & CO
Chartered Accountants
Firm Registration Number: 002917S
Place : Visakhapatnam (KATYAYANI K)
Date : 25.05.2019 Partner
Membership Number: 225030