To the Members of
Daikaffil Chemicals India Limited
Report on theAudit of the Financial Statements
We have audited the accompanying financial statements of Daikaffil Chemicals IndiaLimited ("the Company") which comprise the Balance Sheet as at March 312022the Statement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year then ended and notes to thefinancial statements including a summary of significant accounting policies and otherexplanatory information (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 aforesaid 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 Indian Accounting Standards specified under section 133 ofthe Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended andother accounting principles generally accepted in India of the state of affairs of theCompany as at March 312022 and total comprehensive income (comprising of loss and othercomprehensive income) changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) specified under section 143(10) oftheAct. Our responsibilities under thoseStandards are further described in theAuditors' Responsibilities for theAudit of thefinancial 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 ouraudit of the financial statements under the provisions oftheAct and the Rules thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the ICAI's Code of Ethics.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion on the financial statements.
Material Uncertainty related to Going Concern
We draw attention to Note No. 42 to the financial statements which describes the factsabout planned closure of manufacturing operations for limited period of time primarily onaccount of dry-up of sales orders and management's actions to reduce the fixed costs andfocus on increasing trading activities till the time manufacturing operations restart.
The management does not foresee any threat to going concern status of the company andprepared the financial statements of the company on going concern basis for the reasonselaborately discussed in the said Note. In forming our conclusion we have considered theadequacy of the disclosure made in above referred Note. However the plans describedtherein depend upon how the future events unfold and indicate that a material uncertaintyexists that may cast significant doubt on the company's ability to continue as a goingconcern.
Our conclusion is not modified in respect of this matter.
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of these financial statements of the current period. Thesematters were addressed in the context of our audit of the financial statements as a wholeand in forming our opinion thereon and we do not provide a separate opinion on thesematters.
We have determined that there are no key audit matters to be communicated in ourreport.
Information Other than the Financial Statements andAuditors'Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included Board's Reportincluding Annexure to Board's Report Management Discussion and Analysis and Shareholder'sInformation but does not include the financial statements and ourAuditors'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 identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this information we are required to report that fact. We have nothing toreportin this regard.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
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 accountingprinciples generally accepted in India including the Indian Accounting Standards (Ind AS)specified under section 133 oftheAct. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; 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 the Board of Directors 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 unlessthe management either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financialreporting process. Auditors'ResponsibilitiesfortheAuditofthe 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 auditors' 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 financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of theAct we are also responsible forexpressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the ability ofthe Company to continue as a going concern. If we conclude that a material uncertaintyexists we are required to draw attention in our auditors' report to the relateddisclosures in the financial statements or if such disclosures are inadequate to modifyour opinion. Our conclusions are based on the audit evidence obtained up to the date ofour auditors' report. However future events or conditions may cause the Company to ceaseto continue as a going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
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 ourauditors' 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 2020 ("the Order")issued by the Central Government of India in terms of sub- section (11) of Section 143 oftheAct we give in the "AnnexureA" a statement on the matters specified in theparagraphs 3 and 4 of the said Order to the extent applicable.
2. As required by Section 143(3) of theAct 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 and proper returnsadequate for the purpose of our audit have been received from the Branch not visited byus.
c. The Balance Sheet the Statement of Profit and Loss (including Other ComprehensiveIncome) Statement of changes in Equity and the Statement of Cash Flows dealt with by thisReport are in agreement with the books of account.
d. In our opinion the aforesaid financial statements comply with the IndianAccountingStandards specified under Section 133 oftheAct.
e. The matter described in Material Uncertainty related to Going Concern paragraphmentioned hereinabove in our opinion may have an adverse effect on the functioning ofthe Company;
f. On the basis of the written representations received from the directors as on March312022 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2022 from being appointed as a director in terms of Section 164(2)oftheAct.
g. With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate report in "Annexure B".
h. with respect to the other matters to be included in the Auditors' Report inaccordance with the requirements of section 197(16) oftheAct as amended:
In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 read with Schedule V to theAct.
i. With respect to the other matters to be included in theAuditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in ouropinionand to the best of our information and according to the explanations given to us:
the Company has disclosed the impact of pending litigations on its financialposition in its financial statements-Refer Note 37 to the financial statements.
the Company did not have any long-term contracts including derivative contractsfor which there were material foreseeable losses as at March 312022.
there has been no delay in transferring the amount required to be transferredto the Investor Education and Protection Fund by the Company.
a) The Management has represented that to the best of its knowledge and beliefno funds (which are material either individually or in the aggregate) have been advancedor loaned or invested (either from borrowed funds or share premium or any other sources orkind of funds) by the Company to or in any other person or entity including foreignentity ("Intermediaries") with the understanding whether recorded in writingor otherwise that the Intermediary shall whether directly or indirectly lend or investin other persons or entities identified in any manner whatsoever by or on behalf of theCompany ("Ultimate Beneficiaries") or provide any guarantee security or thelike on behalf of the Ultimate Beneficiaries;
b) The Management has represented that to the best of its knowledge and belief nofunds (which are material either individually or in the aggregate) have been received bythe Company from any person or entity including foreign entity ("FundingParties") with the understanding whether recorded in writing or otherwise that theCompany shall whether directly or indirectly lend or invest in other persons orentities identified in any manner whatsoever by or on behalf of the Funding Party("Ultimate Beneficiaries") or provide any guarantee security or the like onbehalf of the Ultimate Beneficiaries; and
c) Based on the audit procedures that have been considered reasonable and appropriatein the circumstances nothing has come to our notice that has caused us to believe thatthe representations under sub-clause (i) and (ii) of Rule 11(e) as provided under (a) and(b) above contain any material misstatement.
v. The Company has not declared or paid any dividend during the year.
Annexure A to the Independent Auditors' Report
Annexure referred to in Independent Auditors' Report to the members of DaikaffilChemicals India Limited ("the Company") on the financial statements for the yearended March 312022 we report that :
i. (a) (A) The Company has maintained proper records showing full particularsincluding quantitative details and situation of Property Plant and Equipment and relevantdetails of right-of-use assets.
(B) The Company does not have any intangible assets and therefore reporting underclause (i)(a)(B) of the Order is not applicable to the Company.
(b) The Company has a regular program of physical verification of property plant andequipment and Right of use assets which in our opinion is reasonable. The assets whichwere to be covered as per the said program have not been physically verified by themanagement during the year. As the management has not carried out any verification duringthe year we are unable to comment whetherthe discrepancies if any are material.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of all immovable properties(other than properties where the company is the lessee and the lease agreements are dulyexecuted in favour of the lessee) disclosed in financial statements are held in the nameof the Company.
(d) The Company has revalued its Property Plant and Equipment (including Leaseholdland) during the year.The revaluation is based on the valuation by a Registered Valuer.The amount of increase in the net carrying value of leasehold land is of ^ 88.69 Lakhsi.e. approx. 12.68% and plant and machinery is of ^ 101.60 Lakhs i.e. approx. 97.32 %increase of the net carrying value prior to revaluation.
(e) No proceedings have been initiated during the year or are pending against theCompany as at March 312022 for holding any benami property under the Benami Transactions(Prohibition) Act 1988 (as amended in 2016) and rules made thereunder.
ii. (a) The inventory of finished goods stores spare parts and raw materials havebeen physically verified by the management. In our opinion the coverage and procedure ofsuch verification by management is appropriate. On the basis of our examination of therecords of inventory we are of the opinion that the discrepancies noticed on verificationbetween the physical stocks and book records were less than 10% in aggregate for eachclass of inventories and have been properly dealt with in the books of account.
(b) The Company has not availed any working capital limits at any point of time duringthe year from banks or financial institutions and therefor reporting under clause(ii)(b) of the Order is not applicable to the Company.
iii. The Company has not made any investments provided any guarantee or security orgranted any loans or advances in the nature of loans to companies firms LimitedLiability Partnerships or any other parties during the year and therefore reportingunder Clause (iii) of the Order is not applicable to the Company.
iv. The Company has not granted any loans or provided any guarantees or security to theparties covered under section 185 of the Act. In our opinion and according to theinformation and explanation given to us the Company has complied with the provisions ofsection 186 oftheActin respect of the Investments made.
v. According to the information and explanations given to us the Company has notaccepted any deposits or amounts which are considered to be deemed deposits during theyear hence directives issued by the Reserve Bank of India and the provisions of sections73 to 76 or any other relevant provisions of the CompaniesAct and the rules madethereunder are not applicable to the Company. According to information and explanationsprovided to us no order has been passed by Company Law Board or National Company LawTribunal or Reserve Bank of India or any court or any other tribunal.
vi. The maintenance of cost records under sub-section (1) of section 148 of theCompanies Act 2013 is not applicable to the company in view of rule 3 of the Companies(Cost Records andAudit) Rules 2014 as amended.
vii. (a) According to the information and explanations given to us and on the basis ofour examination of the records the Company has generally been regular in depositingundisputed statutory dues including Goods and Services tax Provident Fund Employees'State Insurance Income Tax duty of Custom Cess and any other statutory dues applicableto it with the appropriate authorities. Further no undisputed amounts payable in respectof Goods and Services tax Provident Fund Employees' State Insurance Income Tax duty ofCustom Cess and any other statutory dues in arrears as at March 31 2022 for a period ofmore than six months from the date they became payable.
(b). According to information and explanations given to us and on the basis of ourexamination of the records of the Company there are no statutory dues as referred to insub clause (a) above which have not been deposited on account of any dispute.
viii. There were no transactions relating to previously unrecorded income that havebeen surrendered or disclosed as income during the year in the tax assessments under theIncome TaxAct 1961 (43 of 1961).
ix. (a) The Company has not taken any loans or other borrowings from any lender andtherefore reporting under clause (ix)(a) of the Order is not applicable to the Company.
(b) The Company has not been declared wilful defaulter by any bank or financialinstitution or government or any government authority.
(c) The Company has not taken any term loan during the year and there are nooutstanding term loans at the beginning of the year and therefore reporting under clause(ix)(c) of the Order is not applicable to the Company.
(d) According to the information and explanations given to us and the proceduresperformed by us and on an overall examination of the financial statements of the companywe report that no funds raised on short-term basis have been used for long-term purposesby the company.
(e) According to the information and explanations given to us and on an overallexamination of the records of the company we report that the company has not taken anyfunds from any entity or person and does not have any subsidiary associates or jointventure and therefore reporting under clause (ix) (e) of the order is not applicable tothe Company.
(f) The Company has not raised any loans during the year and therefore reporting onclause 3(ix)(f) of the Order is not applicable.
x. (a) The Company has not raised moneys by way of initial public offer or furtherpublic offer (including debt instruments) during the year and hence reporting under clause3(x)(a) of the Order is not applicable.
(b) During the year the Company has not made any preferential allotment or privateplacement of shares or convertible debentures (fully or partly or optionally) andtherefore reporting under clause (x)(b) of the Order is not applicable to the Company.
xi. (a) No fraud by the Company and no material fraud on the Company has been noticedor reported during the year.
(b) No report has been filed by the auditors in Form ADT-4 as prescribed under Rule 13of Companies (Audit and Auditors) Rules 2014 with the Central Government during the yearand upto the date of this report.
(c) According to the information and explanations given to us no whistle blowercomplaints were received by the Company during the year.
xii. The Company is not a Nidhi Company and hence reporting under clause (xii)oftheOrder is not applicable.
xiii. In our opinion and according to the information and explanations given to us andbased on our examination of the records of the Company all transactions with the relatedparties are in compliance with Section 177 and 188 of the Act where applicable and thedetails have been disclosed in the financial statements as required by the applicableIndian Accounting Standards.
xiv (a) In our opinion and based on our examination the company has an internal auditsystem commensurate with the size and nature of its business.
(b) We have considered the internal audit reports of the company issued till dateforthe period under audit.
xv. According to the information and explanations given to us in our opinion duringthe year the company has not entered into any non-cash transactions with its directors orpersons connected with its directors and hence provisions of section 192 of theCompaniesAct 2013 are not applicable to the Company.
xvi. According to the information and explanations given to us the Company is notrequired to be registered under section 45-IAof the Reserve Bank of India Act 1934.Accordingly the reporting under Clause 3(xvi)(a) 3(xvi)(b) 3(xvi)(c) & 3(xvi)(d) isnot applicable.
xvii The Company has incurred cash losses of Rs. 178.69 lakhs during the financial yearcovered by our audit however there were no cash losses in the immediately precedingfinancial year.
xviii There has been no resignation of the statutory auditors during the year andaccordingly this clause is not applicable.
xix On the basis of the financial ratios ageing and expected dates of realisation offinancial assets and payment of financial liabilities other information accompanying thefinancial statements the management does not foresee any threat to going concern statusof the company and prepared the financial statements of the company on going concern basisfor the reasons elaborately and discussed in the Note No. 41 to the financial statements.However the plans described therein depend upon how the future events unfold and indicatethat a material uncertainty exists that may cast significant doubt on the company'sability to continue as a going concern.
Based on our knowledge of the Board of Directors and Management plans and based on ourexamination of the evidence supporting the assumptions nothing has come to our attentionwhich causes us to believe that any material uncertainty exists as on the date of theaudit report indicating that Company is not capable of meeting its liabilities existing atthe date of balance sheet as and when they fall due within a period of one year from thebalance sheet date. We however state that this is not an assurance as to the futureviability of the Company. We further state that our reporting is based on the facts up tothe date of the audit report and we neither give any guarantee nor any assurance that allliabilities falling due within a period of one year from the balance sheet date will getdischarged by the Company as and when they fall due. We further state that our abovecomments under this clause are to be read with para on "Material uncertainty relatedto going concern" given in our independent audit report.
xx. The company is not required to spend any amount towards Corporate SocialResponsibility (CSR) in view of provisions of Section 135 of theAct and hence reportingunder clause 3(xx)(a) & (b) of the Order is not applicable to the Company.
xxi The Company is not required to prepare consolidated Financial Statements andtherefore reporting under this clause of the Order is not applicable to the Company.
Annexure B to the Independent Auditors' Report
Annexure referred to in Independent Auditors'report of even date to the members ofDaikaffil Chemicals India Limited on the financial statements for the year ended March312022
Report on the Internal Financial Controls with reference to financial statements underClause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013 ("theAct")
We have audited the internal financial controls with reference to financial statementsof Daikaffil Chemicals India Limited ("the Company") as of March 312022in conjunction with our audit of the financial statements of the Company for the yearended 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 with reference to financial statementscriteria 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 undertheAct.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance Note") and the Standards onAuditing issuedby ICAI and prescribed under section 143(10) of theAct to the extent applicable to anaudit of internal financial controls both applicable to an audit of Internal FinancialControls with reference to financial statement and both issued by the Institute ofChartered Accountants of India. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls with reference to financialstatements were established and maintained and if such controls operated effectively inall material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of internal financial controls withreference to financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditors'judgement including theassessment of the risks of material misstatement of the financial statements whether dueto 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 withreference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith the generally accepted accounting principles. A company's internal financial controlswith reference to financial statements 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 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 ofunauthorised acquisition use ordisposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls with reference to financialstatements
Because of the inherent limitations of internal financial controls with reference tofinancial statements 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 withreference to financial statements to future periods are subject to the risk that theinternal financial control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls withreference to financial statements were operating effectively as at March 31 2022 based onthe internal financial control with reference to financial statements established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls over Financial Reporting issued by theInstitute of Chartered Accountants of India.
|For K. C. Mehta & Co. |
|Chartered Accountants |
|Firm's Registration No.106237W |
|NeelaR. Shah |
|Membership No. 045027 |
|UDIN: 22045027AJWXUK8438 |
|Place: Vadodara |
|Date: May302022 |