To the Members of APAR Industries Limited
Report on the audit of the standalone financial statements Opinion
We have audited the standalone financial statements of Apar IndustriesLimited (the Company') which comprise the balance sheet as at 31 March 2019 thestatement of profit and loss (including other comprehensive income) statement of changesin equity and statement of cash flows for the year ended on that date and notes to thefinancial statements including a summary of significant accounting policies and otherexplanatory information (the standalone financial statements'). In our opinion andto the best of our information and according to the explanations given to us theaforesaid standalone financial statements give the information required by the CompaniesAct 2013 (the Act') in the manner so required and give a true and fair view inconformity with the Indian Accounting Standards prescribed under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended (IndAS') and other accounting principles generally accepted in India of the state of affairsof the Company as at 31 March 2019 the profit and total comprehensive income changes inequity and its cash flows for the year ended on that date.
Basis for opinion
We conducted our audit of the standalone financial statements inaccordance with the Standards on Auditing (SAs) specified under section 143(10) of theAct. Our responsibilities under those Standards are further described in the Auditor'sResponsibilities 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 (ICAI') together with theindependence requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the rules made thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theICAI's Code of Ethics.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report:.
|Key audit matters ||How the matter was addressed in our audit |
|Revenue recognition || |
|We have identified the following key areas for consideration of revenue recognition as key audit matters: ||To address this key audit matter our procedure included: |
| Cut-off: This establishes when title risk and rewards are transferred to the customer and gives rise to the risk that revenue is not recognised in the correct period || We obtained an understanding of the accounting processes and relevant controls relating to the accounting of revenue; |
| || Performed walkthroughs of the revenue recognition processes and assessed the design effectiveness of key controls. |
| Accuracy of recognition measurement presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 "Revenue from Contracts with Customers" (new revenue accounting standard). || Tested the controls over the revenue recognition process to confirm operating effectiveness. |
| || We read significant new contracts/ order to understand the terms and conditions and their impact on revenue recognition. |
|The application of the new revenue accounting standard involves certain key judgements relating to identification of distinct performance obligations determination of transaction price of the identified performance obligations the appropriateness of the basis used to measure revenue recognised 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. || We performed cut off tests for all manufacturing locations for material movement (mapping of gate register/ manual register to the GRN/ goods entry accounted for by stores); |
| || Examined invoice samples with shipping documents to ensure that revenue has been recognised in the correct period; and |
| || We assessed the adequacy of the Company's disclosures on revenue recognition as given in notes 24 and 46 to the standalone financial statements |
|Revenue from operations for the year ended 31 March 2019 the Company is Rs. 7586.27 crores. || |
| ||We assessed the Company's process to identify the impact of adoption of the new revenue accounting standard. Our procedures included: |
| ||Evaluated the design of internal controls relating to implementation of the new revenue accounting standard; and |
| || 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 reperformance and inspection of evidence in respect of operation of such controls. |
| ||We also selected a sample of continuing and new contracts and performed the following procedures: |
| || Read analysed and identified the distinct performance obligations in such contracts; |
| || Compared such 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; and |
| || Performed analytical procedures for reasonableness of revenues disclosed by type and service offerings Based on the procedures performed we consider revenue are fairly stated in the standalone financial statements. |
|Derivative financial instruments and hedge accounting || |
|Derivative financial instruments are used to manage and hedge foreign currency exchange risks and commodity risk. Derivatives are initially measured at fair value. Subsequent to initial recognition derivatives are measured at fair value and changes therein are generally recognised in profit or loss. The Company designates certain derivatives as hedging instruments to hedge the variability in cash flows associated with highly probable forecast transactions arising from changes in foreign exchange rates and interest rates. ||Our procedures included: |
| || We obtained an understanding of the risk management policies and testing key controls for the use recognition and measurement of derivative financial instruments; |
| || We reconciled derivative financial instruments data with third party confirmations; |
| || We compared valuation of derivative financial instruments with market data; |
|At inception of designated hedging relationships the Company documents the risk management objective and strategy for undertaking the hedge. The Company also documents the economic relationship between the hedged item and the hedging instrument including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other. || We tested on a sample basis the applicability and accuracy of hedge accounting; and |
| || We considered the appropriateness of disclosures in relation to financial risk management derivative financial instruments and hedge accounting in notes 12A 21A and 35 to 40 to the standalone financial statements; |
|We focused on this area on account of the number of contracts their measurement the complexity related to hedge accounting and the potential impact on the statement of profit and loss. ||Based on the procedures performed the derivative financial instruments and hedge accounting are fairly stated in the standalone financial statements. |
|As at 31 March 2019 the Company has derivative financial assets at fair value of Rs. 25.48 crores and derivative financial liabilities at fair value of Rs. 39.44 crores. (Refer note nos. 12A and 21A) || |
|Inventories || |
|Inventory comprises of raw material including packing material work in progress finished goods and stores and spares. We have identified the inventories as key audit matter because it is material to the standalone financial statements. Inventories aggregate to Rs. 1223.34 crores as of 31 March 2019. ||Our procedures included: |
| || Obtaining an understanding of the supply chain and testing selected key controls over recognition and measurement of inventory; |
| || Testing on a sample basis the accuracy of cost for inventory by verifying supporting documents and testing the net realizable value by comparing actual cost with relevant market data; |
| || Ensuring proper cut-off; |
| || Enquiring with management regarding non-moving and slow- moving inventories; and |
| || by attending the physical stock-taking exercise conducted by management; further we physically verified items on test check basis. |
| ||Based on the procedures performed inventories are fairly stated in the standalone financial statements. |
Information other than the standalone financial statements andauditor's report thereon
The Company's Board of Directors is responsible for the preparation ofthe other information. The other information comprises the information included in theboard's report including annexures thereto and management discussion and analysis butdoes not include the standalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information identified above and in doing soconsider whether the other information is materially inconsistent with the standalonefinancial statements or our knowledge obtained during the course of our audit orotherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.
Management's responsibility for the standalone financial statements
The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the financial position financialperformance total comprehensive income changes in equity and cash flows of the Companyin accordance with the accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 financialstatement 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 isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company'sfinancial reporting process.
Auditor's responsibilities for the audit of the standalone financialstatements
Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal financial controls relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Act we are also responsible for expressingour opinion on whether the Company has adequate internal financial controls system inplace and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
Materiality is the magnitude of misstatements in the standalonefinancial statements that individually or in aggregate make it probable that theeconomic decisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
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 of the Companies Act 2013 we give in the Annexure A a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.
2 As required by section 143(3) of the Act based on our audit wereport that:
(a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;
(b) In our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;
(c) The balance sheet the statement of profit and loss (includingother comprehensive income) statement of changes in equity and the statement of cashflows dealt with by this report are in agreement with the books of account;
(d) In our opinion the aforesaid standalone financial statementscomply with the Ind AS 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 thedirectors as on 31 March 2019 taken on record by the Board of Directors none of thedirectors is disqualified as on 31 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 controlsover financial reporting of the Company and the operating effectiveness of such controlsrefer to our separate 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'sreport in accordance with the requirements of section 197(16) of the Act as amended wereport that in our opinion and to the best of our information and according to theexplanations given to us the remuneration paid by the Company to its directors during theyear is in accordance with the provisions of section 197 of the Act; and
(h) With respect to the other matters to be included in the auditor'sreport in accordance with rule 11 of the Companies (Audit and Auditors) Rules 2014 asamended in our opinion and to the best of our information and according to theexplanations given to us:
i the Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements refer note 44 to thestandalone financial statements; ii the Company has long-term contracts includingderivative contracts for which there are no material foreseeable losses refer notes35 to 41 and 47 to the standalone financial statements; and iii there has been no delay intransferring amounts required to be transferred to the Investor Education and ProtectionFund by the Company refer note 21 to the standalone financial statements.
For Sharp & Tannan LLP
Firm's registration no.127145W/W100218
Firdosh D. Buchia
Membership no. 038332
Mumbai 29 May 2019
Annexure A' to the Independent Auditor's Report
(Referred to in paragraph 1 of our report of even date)
(i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of thefixed assets by which fixed assets are verified in a phased manner. In accordance withthis programme certain fixed assets were verified during the year and no materialdiscrepancies were noticed on such verification. In our opinion the frequency ofverification is reasonable considering the size of the Company and nature of its assets.
(c) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of immovableproperties are held in the name of the Company.
(ii) As explained to us inventories have been physically verified bythe management during the year. In our opinion the frequency of such verification isreasonable. The discrepancies noticed on such verification which were not material havebeen properly dealt with in the books of account.
(iii) According to the information and explanations give to us theCompany has not granted loans secured or unsecured to companies firms limitedliability partnerships or other parties covered in the register maintained under section189 of the Act. Accordingly paragraph 3(iii) of the Order is not applicable to theCompany.
(iv) According to the information and explanations given to us theCompany has complied with the provisions of sections 185 and 186 of the Act in respect ofloans investments guarantees and security.
(v) According to the information and explanations given to us theCompany has not accepted any deposits from the public during the year. Accordinglyparagraph 3(v) of the Order is not applicable to the Company.
(vi) We have broadly reviewed the books of account and recordsmaintained by the Company specified by the central government for the maintenance of costrecords under section 148(1) of the Act with respect to its manufacturing activities andare of the opinion that prima facie the prescribed accounts and records have been madeand maintained. However the contents of these accounts and records have not been examinedby us.
(vii)(a) According to the information and explanations given to us andon the basis of our examination of the records of the Company the Company is generallyregular in depositing undisputed statutory dues including provident fund employees' stateinsurance income tax sales tax service tax duty of customs duty of excise valueadded tax goods and services tax cess and any other statutory dues where applicable tothe appropriate authorities. According to the information and explanations given to usthere are no arrears of outstanding statutory dues as at the last day of the financialyear for a period of more than six months from the date they became payable.
(b) According to the information and explanations given to us and therecords examined by us the particulars of sales tax service tax duty of customs dutyof excise and value added tax as at 31 March 2019 which have not been deposited onaccount of a dispute pending are as under:
|Name of the Statute ||Nature of the disputed dues || |
|Period to which the amount relates ||Forum where disputes are pending |
| || || |
(Rs. in crore)
| || |
|The Central Sales Tax Act 1956 Local Sales Tax Acts and Works Contract Tax Act ||Tax interest and penalty || |
|1998-99 2001-02 2003-04 and 2004-05 2010-11 ||Assistant Commercial Tax Officer / Commercial Tax Officer |
| || || |
|2011-12 to 2012-13 ||Deputy Commissioner |
| || || |
|2002-03 to 2004-05 2006-07 2011-12 to 2013-14 ||Commissioner VAT |
| || || |
|1998-99 2002-03 2006-07 2008-09 2009-10 to 2011-12 ||Tribunal |
| || || |
|2013-14 ||Additional Commissioner |
| || || |
|2012-13 and 2014-15 ||Joint Commissioner |
| || || |
|2009-10 ||High Court |
|The Central Excise Act 1944 The Customs Act 1962 Service Tax under the Finance Act 1994. ||Duty service tax interest and penalty || |
|FY 1996-97 to 2001-02 FY 2004-05 to 2007-08 FY 2011-12 to 2017-18 ||Commissioner (Appeal) |
| || || |
|FY 1998-99 FY 2000-01 to 2001-02 FY 2008-09 to 2017-18 ||CESTAT / Tribunal |
| || || |
|FY 1998-99 to 2006-07 ||High Court |
| || || |
|FY 2000-01 to 2001-02 ||Supreme Court |
(viii) According to the information and explanations given to us theCompany has not defaulted in repayment of loans or borrowings to banks and financialinstitutions. The Company has not taken any loans or borrowings from Government. TheCompany has not issued any debentures.
(ix) According to the information and explanations given to us theCompany has not raised monies by way of initial public offer or further public offer(including debt instruments). In our opinion and according to the explanations given tous on an overall basis the term loans were applied for the purposes for which those wereraised.
(x) During the course of our examination of the books and records ofthe Company carried out in accordance with generally accepted auditing practices in Indiaand according to the information and explanations given to us we have neither come acrossany fraud by the Company or any material fraud on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of such case by management.
(xi) According to the information and explanations given to usmanagerial remuneration has been paid or provided in accordance with the provisions ofsection 197 read with schedule V to the Act.
(xii) According to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable to the Company.
(xiii) According to the information and explanations given to us alltransactions with the related parties are in compliance with sections 177 and 188 of theAct where applicable and the relevant details have been disclosed in the financialstatements as required by the applicable Indian Accounting Standards.
(xiv) According to the information and explanations given to us theCompany has not made any preferential allotment or private placement of shares or fully orpartly convertible debentures during the year. Accordingly paragraph 3(xiv) of the Orderis not applicable to the Company.
(xv) According to the information and explanations given to us theCompany has not entered into any non-cash transactions with directors or persons connectedwith him during the year. Accordingly paragraph 3(xv) of the Order is not applicable tothe Company.
(xvi) 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 Sharp & Tannan LLP
Firdosh D. Buchia
Firm's registration no.127145W/W100218
Membership no. 038332
Mumbai 29 May 2019
Annexure B' to the Independent Auditor's Report
(Referred to in paragraph 2(f) of our report of even date)
Report on the internal financial controls under section 143(3)(i) ofthe Companies Act 2013 (the Act')
We have audited the internal financial controls over financialreporting of Apar Industries Limited (the Company') as of 31 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 andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the Guidance Note') issued by the Institute of CharteredAccountants of India (ICAI'). These responsibilities include the designimplementation and maintenance of adequate internal financial controls 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 the Act.
Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note and the Standards on Auditing issued by ICAI specifiedunder Section 143(10) of the Act to the extent applicable to an audit of internalfinancial controls both applicable to an audit of Internal Financial Controls and bothissued by the ICAI. 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 over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internal financialcontrols system over financial reporting.
Meaning of internal financial controls over financial reporting
A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally 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 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 over financialreporting
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at 31 March 2019 based onthe internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Noteissued by the ICAI.
| ||for SHARP & TANNAN LLP |
| ||Chartered Accountants |
| ||Firm's Registration No.127145W / W100218 |
| ||Firdosh D. Buchia |
| ||Partner |
|Mumbai 29 May 2019 ||Membership no. 038332 |