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Dalmia Refractories Ltd.

BSE: 500481 Sector: Engineering
NSE: DALMIAREF ISIN Code: INE200F01017
BSE 05:30 | 01 Jan Dalmia Refractories Ltd
NSE 05:30 | 01 Jan Dalmia Refractories Ltd

Dalmia Refractories Ltd. (DALMIAREF) - Auditors Report

Company auditors report

To the Members of Dalmia Refractories Limited

Report on the Audit of Standalone Financial Statements

Opinion

We have audited the standalone financial statements of Dalmia Refractories Limited(“the Company”) which comprise the balance sheet as at 31st March 2019 and thestatement of Profit and Loss statement of changes in equity and statement of cash flowsfor the year then ended and notes to the financial statements including a summary ofsignificant accounting policies and other explanatory information. (hereinafter referredto as “the 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 Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at 31st March 2019 and profit changes in equity and its cash flows for the yearended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit 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 together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have ful lled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsigni cance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.

Key Audit Matter How our audit addressed the matter
(i) Inventories
As of 31 March 2019 inventories appear on the financial statements for an amount of Rs. 4958.44 lakhs which constitutes 53.24% of the total current assets. As indicated in note no. 6 to the financial statements inventories are valued at the lower of cost and net realizable value: The Company may recognize an inventory allowance if inventory items are damaged if the selling price has declined or if the estimated costs to completion or to be incurred to make the sale have increased. Our audit procedures included the following:
We focused on this matter because of the: Signi cance of the inventory balance. Review the Company's process and procedures for physical veri cation of inventories at year end except material in transit Assessing the methods used to value inventories and ensuring ourselves of the consistency of accounting methods.
Complexity involved in determining inventory quantities on hand due to the number location and diversity of inventory storage locations. Testing by sampling the effectiveness of the controls set up by Management to prevent or detect possible errors in valuation of inventories.
Valuation procedure including of obsolete inventories. Review of the reported acquisition cost on a sample basis.
Analysis of the Company's assessment of net realizable value as well as review of assumptions and calculations for stock obsolescence.
Assessment of appropriateness of disclosures provided in the financial statements.
(ii) 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).
Revenue is recognized net of discounts & rebates earned by the customers on the Company's sales. The estimation of discounts & rebates recognized based on sales made during the year. We assessed the Company's processes and controls for recognizing revenue as part of our audit. Our audit procedures included the following:
Revenue is recognized when control of the underlying products have been transferred along with satisfaction of performance obligation. Assessing the environment of the IT systems related to invoicing and measurement as well as other relevant systems supporting the accounting of revenue including the implemented controls of system changes.
The application of the new revenue accounting standard involves certain key judgments relating to identi cation of distinct performance obligations and determination of transaction price of the identified performance obligations. Examining customer invoices and receipts of payment on a test basis.
Further customer's incentive rebate/discounts represent a material reduction in sales and process for calculating and recording the above involves significant manual process. We performed procedures to identify any significant transactions recorded as manual adjustments and obtained evidence to support the recognition and timing of incentive and rebate/discount amounts based on the individual agreements.
Additionally new revenue accounting standard contains disclosures which involve collation of information in respect of disaggregated revenue. With regard to the expected impact of the initial application of Ind AS 115 from the financial year 2018 onward our audit approach included among other items:
Accordingly it has been determined as a key audit matter. Assessing the Company's process to identify the impact of adoption of the new revenue accounting standards.
Evaluating the design of internal controls and its operating effectiveness relating to implementation of the new revenue accounting standard.
Verifying the completeness of disclosure in the financial statements as per Ind AS 115.

Information Other than the Financial Statements and Auditor's Report Thereon

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in annual report but does not include thefinancial statements and our auditor's report thereon. Our opinion on the financialstatements does not cover the other information and we do not express any form ofassurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and those charged with Governance for the StandaloneFinancial Statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ('the Act') with respect to the preparation of theseStandalone financial statements that give a true and fair view of the financial positionfinancial performance including other comprehensive income cash flows and changes inequity of the Company in accordance with the accounting principles generally accepted inIndia including the Indian Accounting Standards ('Ind AS') prescribed under Section 133of the Act read with relevant rules issued there under. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the Standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.

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

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SA'swill 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 the Companies act 2013 we are also responsible for expressing our opinion on whetherthe company 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

• Evaluate the overall presentation structure and content of the 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 ndings including anysignificant de ciencies 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 signi cance 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 issued by the CentralGovernment of India in terms of sub-section (11) of section 143 of the Act (“theOrder”) and on the basis of such checks of the books and records of the Company aswe considered appropriate and according to the information and explanations given to uswe give in the “Annexure A” a statement on the matters specified in paragraphs 3and 4 of the Order.

2. Further to our comment in the Annexure A as required by Section 143 (3) of the Actwe 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) the Cash Flow Statement and the Statement of Changes in Equity dealt with by thisreport are in agreement with the books of account;

d. In our opinion the aforesaid Standalone financial statements comply with Ind ASprescribed under Section 133 of the Act read with rule ;

e. On the basis of the written representations received from the directors of theCompany as on 31 March 2019 taken on record by the Board of Directors none of thedirectors is disquali ed as on 31st March 2019 from being appointed as a director interms of Section 164(2) of the Act;

f. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in “Annexure B”;

g. With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197 (16) of the Act; In our opinion and to thebest of our information and according to the explanations given to us the managerialremuneration has been paid / provided by the Company to its directors in accordance withprovisions of section 197 read with Schedule V to the Act.

h. With respect to the other matters to be included in the Auditor's report inaccordance with Rule 11 of the Companies (Audit and Auditor's) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company as detailed in Note 29 to the Standalone financial statements hasdisclosed the impact of pending litigations on its financial position.

ii. The Company did not have any material foreseeable losses on long term contractsincluding derivative contracts for which there were any material foreseeable losses.

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

For Chaturvedi & Shah LLP
Chartered Accountants
Firm Registration No. 101720W/W100355
Vijay Napawaliya
Place: New Delhi Partner
Date: 24 May 2019 Membership No. 109859

“ANNEXURE A” to the Independent Auditor's Report

(Referred to in paragraph 1 under the heading “Report on Other Legal andRegulatory Requirements” of our report of even date to the members of the DalmiaRefractories Limited on the Standalone financial statements for the year ended 31 March2019)

(i) In respect of xed assets:-

(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of the xed assets. (b) The xed assets are physicallyveri ed by the management according to a phased programme designed to cover all the itemsover a period of three years which in our opinion is reasonable having regard to thesize of the Company and the nature of its assets. Pursuant to the programme a portion ofthe xed assets has been physically veri ed by the management during the year and nomaterial discrepancies were noticed on such veri cation.

(c) According to information and explanation given to us and on the basis of ourexamination of records of the Company the title deeds of immovable properties are held inthe name of the Company.

(ii) In respect of its inventories:-

As explained to us inventories have been physically veri ed during the year by themanagement except goods in transit which have been veri ed with reference to con rmationsand/or subsequent receipt of material. In our opinion the frequency of veri cation isreasonable. Discrepancies noticed on physical veri cation of the inventories between thephysical inventories and book records were not material having regard to the size of theoperations of the Company and the same have been properly dealt with.

(iii) The Company has not granted any loans secured or unsecured to companies rmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Companies Act 2013. Therefore the provision of paragraph 3 (iii) ofthe Order are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of sections 185 & 186 of the Act asapplicable in respect of grant of loans making investments and providing guarantees& securities.

(v) The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the Rules framed there under to the extentnotified. During the year no order has been passed by the Company Law Board or NationalCompany Law Tribunal or Reserve Bank of India or any court or any other Tribunal.

(vi) Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under Section 148(1) of the Act in respectof its products. We have broadly reviewed the same and are of the opinion that primafacie the prescribed accounts and records have been made and maintained. We have nothowever made a detailed examination of the records with a view to determine whether theyare accurate or complete.

(vii) (a) According to the records of the company and information and explanationsgiven to us the Company has been generally regular in depositing undisputed statutorydues including provident fund employees' state insurance income tax duty of customsGoods and Service Tax cess and any other statutory dues to the appropriate authorities asapplicable during the year. According to the information and explanations given to us noundisputed amounts payable in respect of such statutory dues were outstanding as at March31 2019 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 the records of theCompany examined by us there are no dues of income-tax sales-tax Goods and Service Taxservice-tax duty of customs and duty of excise or value added tax which have not beendeposited on account of any dispute except as mentioned below:-

Name of the Statute Nature of the Dues Amount (Rs. Lakh)* Period to which amount Relates Forum Where the dispute is Pending
Madhya Pradesh Vat Act 2002 Sales Tax 5.44 2009-10 to 2014-15 Sales Tax Department Katni
The Gujarat VAT Tax Act 2003 Sales Tax 35.07 2001-2002 Supreme Court
Finance Act 1994 Service Tax 71.14 2004-05 to 2011-12 CESTAT Ahmedabad
Finance Act 1994 Service Tax 77.38 2013-14 to 2014-15 Commissioner (Appeals) Rajkot
Finance Act 1994 Service Tax 41.61 2014-15 Assistant Commissioner of Central GST & Central Excise Jamnagar
*Net off amount paid

(viii) According to the records of the Company examined by us and the information andexplanation given to us the Company has not defaulted in repayment of loans or borrowingsto any financial institution or bank as at the balance sheet date. There are no dues ofGovernment or debenture holders.

(ix) According to the information and explanations given to us the Company did notraise any moneys by way of initial public offer further public offer (including debtinstruments) and no term loans was raised during the year. Therefore the provisions ofClause 3(ix) of the Order are not applicable to the Company.

(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its of cers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.

(xi) In our opinion and according to the information and explanations given to us theCompany has paid or provided managerial remuneration in accordance with requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.

(xii) As the Company is not a Nidhi Company and the Nidhi Rules 2014 are notapplicable to it the provisions of Clause 3(xii) of the Order are not applicable to theCompany.

(xiii) The Company has entered into transactions with related parties in compliancewith the provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the financial statements as required under IndianAccounting Standard (Ind AS) 24 Related Party Disclosures specified in the Companies(Indian Accounting Standards) Rules 2015 (as amended) under Section 133 of the Act.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures. Therefore the provisionsof Clause 3(xiv) of the Order are not applicable to the Company.

(xv) According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with him.Therefore the provisions of Clause 3(xv) of the Order are not applicable to the Company.

(xvi) The Company is not required to be registered under section 45-1A of the ReserveBank of India Act 1934.

For Chaturvedi & Shah LLP
Chartered Accountants
Firm Registration No. 101720W/W100355
Vijay Napawaliya
Place: New Delhi Partner
Date: 24 May 2019 Membership No. 109859

“ANNEXURE B” to the Independent Auditor's Report

Referred to in paragraph 2(f) under the heading “Report on Other Legal andRegulatory Requirements” of our report of even date to the members of the DalmiaRefractories Limited on the Standalone financial statements for the year ended 31 March2019.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of DalmiaRefractories Limited (“the Company”) as of 31 March 2019 in conjunction withour audit of the Standalone financial statements of the Company for the year ended on thatdate.

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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the

Company's internal financial controls over financial reporting based on our audit. Weconducted our audit in accordance with the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting (the “Guidance Note”) and the Standards onAuditing issued by ICAI and deemed to be prescribed under section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controlsboth applicable to an audit of Internal Financial Controls and both issued by theInstitute of Chartered Accountants of India. Those Standards and the Guidance Note requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting was established and maintained and if such controls operated effectively in allmaterial respects. Our audit involves performing procedures to obtain audit evidence 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 standalone Ind AS financial statements whether dueto 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 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 the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized 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 Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2019 based on theinternal control over financial reporting criteria 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 Chaturvedi & Shah LLP
Chartered Accountants
Firm Registration No. 101720W/W100355
Vijay Napawaliya
Place: New Delhi Partner
Date: 24 May 2019 Membership No. 109859