BANCO PRODUCTS (INDIA) LIMITED VADODARA
Report on the audit of the standalone financial statements
We have audited the accompanying standalone financial statements of Banco Products(India) Limited ("the Company") which comprise the Balance Sheet as at 31stMarch 2020 the Statement of Profit and Loss (including other comprehensive income)and Cash Flow Statement and Statement of Changes in Equity for the year then ended and asummary of significant accounting policies and other explanatory information (hereinafterreferred to as "the standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at 31st March 2020 and its profitTotal Comprehensive Income changes in equity and its cash flows for the year ended onthat date.
Basis for opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under section 143(10) of the Companies Act 2013.Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India together with the ethical requirements that are relevantto our audit of the standalone financial statements under the provisions of the CompaniesAct 2013 and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
Emphasis of matter
We draw your attention to Note 2.4 of the Standalone Financial Statements whichexplains the management's assessment of the financial impact due to the lock-down andother restrictions and conditions related to the COVID 19 pandemic situation forwhich a definitive assessment of the impact in the subsequent period is highly dependentupon circumstances as they evolve.
Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that in our professional judgment 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 matters described below to bethe key audit matters to be communicated in our report.
|Key audit matters ||Auditors' response |
|Revenue recognition || |
| ||Audit procedures included the following: |
|The Company recognizes revenues when control of the goods is transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. In determining the sales price the Company considers the effects of rebates and discounts (variable consideration). The terms of arrangements in case of domestic and exports sales including the timing of transfer of control the nature of discount and rebates arrangements delivery specifications including incoterms create complexity and judgment in determining sales revenues. || Considered the adequacy of the Company's revenue recognition policy and its compliance in terms of Ind AS 115 'Revenue from contracts with customers'. |
| || Assessed the design and tested the operating effectiveness of internal controls related to revenue recognition. |
| || Performed sample tests of individual sales transaction and traced to sales invoices and other related documents. In respect of the samples selected tested that the revenue has been recognized as per the incoterms in accordance with Ind AS 115. |
|The risk is therefore that revenue is not recognized in the correct period in accordance with terms of Ind AS 115 'Revenue from contracts with customers' and accordingly it was determined to be a key audit matter in our audit of the Standalone Ind AS financial statements. || Selected sample of sales transactions made pre and post- year end agreed the period of revenue recognition to underlying supporting documents. |
| || Assessed the relevant disclosures made in the Standalone Ind AS financial statements. |
|Litigations and claims provisions and contingent liabilities || |
| ||Our procedures included but were not limited to the following: |
|As disclosed in Note 32 [Capital Commitments and Contingent Liabilities] to the standalone financial statements the Company is involved in direct and indirect tax litigations amounting to Rs 1182.72 lakhs that are pending with various tax authorities. || Obtained an understanding from the management with respect to process and controls followed by the Company for identification and monitoring of significant developments in relation to the litigations including completeness thereof. |
|Whether a liability is recognized or disclosed as a contingent liability in the standalone financial statements is inherently judgmental and dependent on a number of significant assumptions and assessments. These include assumptions relating to the likelihood and/or timing of the cash outflows from the business and the interpretation of local laws and pending assessments at various levels of the statute. We placed specific focus on the judgments in respect to these demands against the Company. || Obtained the list of litigations from the management and reviewed their assessment of the likelihood of outflow of economic resources being probable possible or remote in respect of the litigations. This involved assessing the probability of an unfavorable outcome of a given proceeding and the reliability of estimates of related amounts |
| || Performed substantive procedures including tracing from underlying documents / communications from the tax authorities and re-computation of the amounts involved. |
| || Assessed management's conclusions through discussions held with the in house legal counsel and understanding precedents in similar cases; |
|Determining the amount if any to be recognized or disclosed in the standalone financial statements is inherently subjective. The amounts involved are potentially significant and due to the range of possible outcomes and considerable uncertainty around the various claims the determination of the need for creating a provision in the standalone financial statements is inherently subjective and therefore is considered to be a key audit matter in the current year. || Obtained and evaluated the independent confirmations from the consultants representing the Company before the various authorities. |
| || Engaged auditor's experts who obtained an understanding of the current status of the litigations conducted discussions with the management reviewed independent legal advice received by the Company if any and considered relevant legal provisions and available precedents to validate the conclusions made by the management. |
| || Assessed and validated the adequacy and appropriateness of the disclosures made by the management in the standalone financial statements. |
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 Board's Report Business ResponsibilityReport Report on Corporate Governance but does not include the consolidated financialstatements standalone financial statements 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 t he other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears t o be materially misstated.If based on the work we have performed we conclude that there is a material misstatementof this other information; we are required to report that fact. We have nothing to reportin 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 standalone financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding 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 mainte7nance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
The Board of Directors is responsible for overseeing the Company's financial reportingprocess.
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 standalone financial statements. As part of an audit inaccordance with SAs we exercise professional judgment and maintain professionalskepticism 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 financial controls relevant to the audit inorder to 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 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.
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 ("theOrder") issued by the Central Government of India in terms of Section 143(11) of theAct we give in the "Annexure-A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
2. As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
(c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome 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 standalone financial statements comply with the IndAS specified under 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 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2020 from being appointed as a director in termsof Section 164 (2) of the Act.
(f) With respect to adequacy of the internal financial controls over financialreporting and the operating effectiveness of such controls refer to our separate reportin "Annexure- B" attached herewith.
(g) 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 litigation on its financial positionin its standalone financial statement. Refer Note 32 of the Standalone FinancialStatements;
ii. The Company did not have any long-term contracts including derivative contracts;for which there were any material foreseeable losses; and
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
For PARIKH SHAH CHOTALIA & ASSOCIATES
CA RAHUL PARIKH
Membership No. 105642
VADODARA 11th June 2020
ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 2 under "report on other legal and regulatoryrequirements of the independent auditors' report of even date)
On the basis of such checks as we considered appropriate and in terms of theinformation and explanations given to us we state that:-
I. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner over a period of three years. In ouropinion this periodicity of physical verification is reasonable having regard to the sizeof the Company and the nature of its assets. No material discrepancies were noticed onsuch verification.
(c) In our opinion and 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. The inventory except goods-in-transit and stock lying with third parties havebeen physically verified by the management during the year. In our opinion the frequencyof such verification is reasonable. For stock lying with the third parties at the yearend written confirmations have been obtained. The discrepancies noticed on verificationbetween the physical stock and book records were not material and have been properly dealtwith in books of account.
III. According to the information and explanations given to us the Company has notgranted any loans Secured or unsecured to companies firm Limited liability Partnershipsor other parties covered in the register maintained under section 189 of the CompaniesAct 2013 the Act'.
IV. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act with respectto the loans investments guarantees and security as applicable.
V. In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public in accordance with the provisions ofsection 73 to 76 or any other relevant provision of the act and the rules framed thereunder. Accordingly Paragraph 3(v) of the order is not applicable to the Company.
VI. We have broadly reviewed the books of accounts maintained by the Company pursuantto the rules prescribe by the central government for the maintenance of cost records undersection 148(1) of the Act and are of the opinion that prime facie the prescribed accountsand records have been made and maintained. We have not however made detailed examinationof the records with a view to determine whether they are accurate or complete.
VII. (a) According to the information and explanations given to us and on thebasis of our examination of the records of the Company amounts deducted/ accrued in thebooks of account in respect of undisputed statutory dues including provident fundincome-tax sales tax/value added tax goods and service tax duty of customs duty ofexcise service tax cess and other material statutory dues have been regularly depositedduring the year by the Company with the appropriate authorities. According to theinformation and explanations given to us no undisputed amounts payable in respect ofprovident fund income tax sales tax value added tax goods and service tax duty ofcustoms duty of excise service tax cess and other material statutory dues were inarrears as at 31st March 2020 for a period of more than six months from thedate they became payable
(b) According to the information and explanations given to us dues that have not beendeposited by the Company on account of disputes are as follows:
|Name of the Statute ||Nature of Dues ||Amount ||Period to which the amount relates ||Forum where dispute is pending |
| || ||Rs in Lakhs || || |
|Central Excise Act 1944 ||Excise Duty Service Tax and Custom Duty ||1090.71 ||F.Y. 2006-07 till F.Y. 2018-19 ||- Rs 246.99 lakhs pending with CESTAT Ahmedabad. |
| || || || ||- Rs 24.43 lakhs pending CESTAT Mumbai. |
| || || || ||- Rs 593.68 lakhs pending with Commisioner Central Excise and Custom (Appeal). |
| || || || ||- Rs 0.21 lakhs pending with Superintendent Central Excise and Custom (Appeal). |
| || || || ||- Rs 11.78 lakhs pending with Commisioner (Appeal)Customs Mumbai. |
| || || || ||- Rs 213.62 lakhs pending with High Court (Gujarat). |
|Sales Tax Act ||VAT/CST ||80.92 ||F.Y. 2008-09 till 2012-13 ||- Rs 50.83 lakhs pending with Apellate Tribunal Ahmedabad. |
| || || || ||- Rs 29.35 lakhs pending with Commissioner (Appeal) Ranchi. |
| || || || ||- Rs 0.74 lakhs pending with Deputy Commissioner |
|CGST Act and SGST Act under UP GST Act. ||CGST/ SGST ||1.79 ||F.Y. 2017-18 ||Pending GST Authority |
|Income Tax Act 1961 ||Income Tax ||9.30 ||F.Y. 2011-12 (i.e. A.Y. 2012-13) ||CIT (Appeal). |
VIII. In our opinion and according to the information and explanations given to us theCompany has not defaulted during the year in repayment of dues to the financialinstitution banks and government. The Company did not have any outstanding debenturesduring the year.
IX. The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year.
X. According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe year.
XI. According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Act.
XII. According to the information and explanations given to us the Company is not aNidhi Company as prescribed under section 406 of the Act. Accordingly Paragraph 3(xii) ofthe Order is not applicable.
XIII. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableIndian accounting standards.
XIV. According to the information and explanations given to us the Company has notmade any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year under review and therefore the provisions ofSection 42 of the Companies Act 2013 are not applicable to the Company.
XV. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with directors or persons connected with them.
XVI. According to the information and explanations give to us The Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.Accordingly Paragraph 3(xvi) of the order is not applicable to the Company.
For PARIKH SHAH CHOTALIA & ASSOCIATES
CA RAHUL PARIKH
Membership No. 105642
VADODARA 11th June 2020
ANNEXURE - "B" TO 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 the financial reporting of BancoProducts (India) Limited ("the Company") as on 31st March 2020in conjunction with our audit of the Standalone Financial Statements of the Company forthe year 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 ("ICAI"). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols 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") issued by ICAI and the Standards on Auditing issued byICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013 to theextent applicable to an audit of internal financial controls. Those Standards and theGuidance Notes require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial control systems 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 risk of materialmisstatement 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 financial statements for external purposes in accordance with generallyaccepted accounting principles. A Company's internal financial control over financialreporting includes those policies and procedures that:
(1) Pertain to maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the Company;
(2) Provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the Company are being made only inaccordance with authorizations of management and directors of the Company; and
(3) Provide reasonable assurance regarding prevention or timely detection ofunauthorized 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 inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper managements 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 may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.
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 31st March 2020 based on the criteria forinternal financial control over financial reporting established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
For PARIKH SHAH CHOTALIA & ASSOCIATES
CA RAHUL PARIKH
Membership No. 105642
VADODARA 11th June 2020