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Andhra Petrochemicals Ltd.

BSE: 500012 Sector: Industrials
NSE: ANDHRAPET ISIN Code: INE714B01016
BSE 00:00 | 19 Oct 142.75 -4.15
(-2.83%)
OPEN

146.90

HIGH

150.85

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141.50

NSE 05:30 | 01 Jan Andhra Petrochemicals Ltd
OPEN 146.90
PREVIOUS CLOSE 146.90
VOLUME 120849
52-Week high 197.40
52-Week low 29.35
P/E 8.59
Mkt Cap.(Rs cr) 1,213
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 146.90
CLOSE 146.90
VOLUME 120849
52-Week high 197.40
52-Week low 29.35
P/E 8.59
Mkt Cap.(Rs cr) 1,213
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

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 312020 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 31 2020 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 Audit ofthe Financial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (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.

Key Audit Matter How our audit addressed the Key Audit Matter
1 Adoption of Ind AS 116 "Leases"
Accuracy of identification classification measurement presentation and disclosures of lease transactions in view of adoption of Ind AS 116 "Leases" We assessed the various Company's process and contracts entered with various property owners to identify the impact of adoption of the new accounting standard.
The application of the above new accounting standard involves certain key judgements relating to identification of contracts which contains lease classification of leases the appropriateness of the basis used to measure the right of use asset and lease liability at the date of initial application. Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
Evaluated the design of internal controls relating to implementation of the new accounting standard.
• We have gone through the terms of the lease contracts of continuing and new contracts and tested the operating effectiveness of the internal controls relating to identification classification and measurement of lease contracts.
Refer: Note 2.41 to the Financial Statements • We evaluated the methodology and assumptions used by management including reasonableness of the lease term lease rentals discount rate applied by comparing it with the incremental borrowing rate for a similar period.
We tested the calculation of the right of use assets and lease obligations based on the assumptions applied.
Conclusion: Based on the work performed we found management's assessment to be reasonable based on available evidence.
2 Valuation of Investments in Unquoted Equity Shares of Andhra Pradesh Gas Power company 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 shareholders 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.
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 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.
• We tested the calculation of the fair value based on the assumptions applied.
We found the disclosures in the financial statements to be appropriate.
Conclusion: Based on the work performed and the evidence obtained we consider the methodology and assumptions used by management to be appropriate.
Refer: Note 3.2 to the Financial Statements
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. Refer: Note 2.37 to the Financial Statements Our audit procedures to assess the decommissioning provision included the following:
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.

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 are free from material misstatement whether due to fraud or error and toissue an auditor's report that includes our opinion. Reasonable assurance is a high levelof assurance but is not a guarantee that an audit conducted in accordance with SAs willalways detect a material misstatement when it exists. Misstatements can arise from fraudor error and are considered material if individually or in the aggregate they couldreasonably be expected to influence the economic decisions of users taken on the basis ofthese 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 reasonableness ofaccounting 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 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 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct.

f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure 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 section197(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. There is no delay in amount which is required to be transferred to the InvestorEducation and Protection Fund by the company.

For C V RAMANA RAO & CO..
Chartered Accountants
Firm Reg. No. 002917S
(KATYAYANI K)
Partner
Membership No.225030
Place: Tanuku
Date: 20th June 2020

ANNEXURE-A TO THE INDEPENDENT AUDITORS' REPORT

The Annexure A referred to in our Independent Auditor's report of even date tothe members of THE ANDHRA PETROCHEMICALS LIMITED TANUKU for the year ended 31 March2020. We report 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 2020 for a period of more than six months from the date they became payable.

b) As at 31st March 2020 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.

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 clause3(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 noncash transactions with the directors orpersons connected with them during the year under report. Consequently the clause 3(xv)of the 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
Firm Reg. No. 002917S
(KATYAYANI K)
Partner
Membership No.225030
Place: Tanuku
Date: 20th June 2020

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 THE ANDHRAPETROCHEMICALS LIMITED ("the Company") as of 31 st March 2020 in conjunctionwith our audit of the financial statements of the Company for the year ended on 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 2020 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 Reg. No. 002917S
(KATYAYANI K)
Partner
Membership No.225030
Place: Tanuku
Date: 20th June 2020

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