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Dharani Sugars & Chemicals Ltd.

BSE: 507442 Sector: Agri and agri inputs
NSE: DHARSUGAR ISIN Code: INE988C01014
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OPEN 5.89
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VOLUME 1001
52-Week high 8.20
52-Week low 3.97
P/E
Mkt Cap.(Rs cr) 18
Buy Price 5.40
Buy Qty 1000.00
Sell Price 5.87
Sell Qty 500.00
OPEN 5.89
CLOSE 5.67
VOLUME 1001
52-Week high 8.20
52-Week low 3.97
P/E
Mkt Cap.(Rs cr) 18
Buy Price 5.40
Buy Qty 1000.00
Sell Price 5.87
Sell Qty 500.00

Dharani Sugars & Chemicals Ltd. (DHARSUGAR) - Auditors Report

Company auditors report

TO THE MEMBERS OF DHARANI SUGARS AND CHEMICALS LIMITED

Report on the audit of the financial Statements

Opinion

We have audited the financial statements of Dharani Sugars and Chemicals Limited (the Company) which comprise the balance sheet as at March 31 2019 and the statement of profit and loss (including other comprehensive income) the statement of changes in equity and the statement of cash flows for the year then ended and notes to the financial statements including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us the aforesaid financial statements give the information required by the Companies Act 2013 (Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at March 31 2019 and its profit total comprehensive income the changes in equity and cash flows for the year ended as on that date.

Basis for opinion

We conducted our audit in accordance with the standards on auditing (SAs) specified under section 143 (10) of the Act. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the code of ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's code of ethics.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

The Company's net worth is negative and the borrowings from banks and financial institutions have been classified by the lenders as non-performing assets during the year. We understand from the management that the poor performance of the Company is mainly due to low availability of sugarcane for crushing as planting areas are being continuously reduced due to continuous draught and the general slowdown in sugar industry due to factors like failure of monsoon varietal degeneration reduced recovery decline in area under cultivation and the resultant reduction in capacity utilisation of sugar mills.

This being a general industry issue a formal representation was made by the South Indian Sugar Mills Association (SISMA) in which the Company is a member to the Hon'ble Prime Minister and the Chief Minister of Tamil Nadu for announcing revival packages for the sugar industry. SISMA expects that its demands will be considered by the Central and State Governments favourably.

On a petition led by the Company and others the Hon'ble Supreme Court of India declared the RBI circular of February 12 2018 as ultra-vires Section 35AA of the Banking Regulation Act. The Company has submitted a resolution plan to the consortium banks for restructuring the loans and the consortium banks have suggested to the Company to plan for a One Time Settlement (OTS) of the loans. The lenders agreed to initiate fresh valuations for plant and machineries of all the three units. Subsequent to the balance sheet date few banks issued notice to recall the loans. We understand that the Company is in the process of appropriately replying to the notices. The next hearing of the consortium banks is expected to be in June 2019. We were informed that the Company is also in the process of identifying alternative plans to initiate the OTS with the banks. Pending submission of the OTS/ other alternative resolution plans a decision is yet to be taken by the lenders regarding restructuring of the Company's borrowings.

The above factors cast a significant uncertainty on the Company's ability to continue as a going concern. Pending the resolution of the above uncertainties the Company has prepared the aforesaid statement on a going concern basis.

Key audit matters

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

In addition to the matter described in the Material Uncertainty Related to Going Concern section we have determined the matters described below to be the key audit matters to be communicated in our report.

(a) Adoption of new revenue recognition standard Ind AS 115

Details of the Key Audit Matter

The Company adopted Ind AS 115 Revenue from Contracts with Customers with effect from April 1 2018. 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 and point of recognition of revenue. Ind AS 115 also requires extensive disclosures.

Auditors' Response to the Key Audit Matter

We assessed the Company's process to identify the impact of adoption of the new revenue accounting standard (Ind AS 115).

Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:

(a) Evaluated the design of internal controls relating to implementation of the new revenue accounting standard.

(b) Selected a sample of continuing and new contracts and tested the operating effectiveness of the internal control relating to identification of the distinct performance obligations and determination of transaction price.

(c) Selected a sample of continuing and new contracts and performed the following procedures:

 Read analysed and identified the distinct performance obligations in these contracts.

 Compared these 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.

Performed analytical procedures for reasonableness of revenue recognition as per Ind AS 115.

(b) Dues from TANGEDCO

Description of Key Audit Matter

Trade receivables includes Rs.2829.23 Lakhs due from TANGEDCO is outstanding for more than 1 year. The Company is following up for recovery of the same and initiated the required steps. The Company is also initiated steps through South Indian Sugar Mills Association (SISMA) to represent to the Government of Tamilnadu for instructing TANGEDCO to pay the dues.

Since these are due from Government Undertakings and are arising from contractual obligation of those undertakings in the opinion of the management no allowance for expected credit loss is considered required.

Auditors' Response to the Key Audit Matter

We assessed the Company's process to identify the recoverability of trade receivables.

Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:

(a) Evaluated the design of internal controls relating to evaluation of credit risk in trade receivables.

(b) Selected a sample of contracts with TANGEDCO and performed the following procedures:

 Read analysed and identified the terms of the contract and the contractual obligations of the customer

 Compared the results with those identified and recorded by the Company.

 Considered the terms of the contracts to determine whether the amounts recognised in the earlier years is as per the contract terms agreed by the customer.

 Obtained and evaluated management estimation of future recoverability considering the sovereignty of the Government of Tamilnadu and management conclusion that it is only a case of delay in collection and no amount will become bad

 Obtain an understanding that this is a general issue of the industry and ongoing follow-up is being made with TANGEDCO and the Government of Tamilnadu.

Information other than the financial statements and auditors' report thereon

The Company's board of directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis Board's Report including Annexures to Board's Report Business Responsibility Report Corporate Governance and Shareholder's Information but does not include the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there is a material misstatement of this other information we are required to report that fact. We have nothing to report in this regard.

Management's responsibility for the financial statements

The Company's board of directors is responsible for the matters stated in section 134 (5) of the Act with respect to the preparation of these financial statements that give a true and fair view of the financial position financial performance including other comprehensive income cash flows and changes in equity of the Company in accordance with the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended from time to time and other accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error.

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

The board of directors are also responsible for overseeing the Company's financial reporting process.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement whether due 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 audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with SAs we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 Identify and assess the risks of material misstatement of the financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.

 Obtain an understanding of internal controls relevant to the audit in order to design 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 whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls

 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the 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's report. However future events or conditions may cause the Company to cease to continue as a going concern.

 Evaluate the overall presentation structure and content of the financial statements including the disclosures and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the financial statements that individually or in aggregate makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

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 Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order.

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 best of 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 the Company so far as it appears from our examination of those books;

(c) The balance sheet the statement of profit and loss including other comprehensive income statement of changes in equity and the statement of cash flow dealt with by this report are in agreement with the books of account;

(d) In our opinion the aforesaid financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act;

(e) On the basis of the written representations received from the directors as on March 31 2019 taken on record by the Board of Directors none of the directors is disqualified as on March 31 2019 from being appointed as a director in terms of Section 164 (2) of the Act;

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls refer to our separate report in Annexure B. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting;

(g) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197 (16) of the Act as amended in our opinion and to the best of our information and according to the explanations given to us the remuneration paid by the Company to its directors during the year 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's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to the best of our information and according to the explanations given to us: a. The Company has disclosed the impact of pending litigations on its financial position in its financial statements Refer Note 40 to the financial statement b. The Company has made provision as required under the applicable law or accounting standards for material foreseeable losses if any on long-term contracts including derivative contracts; and c. While there has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company the related shares could not be transferred due to technical issues. We were informed that the Company is taking necessary steps in this regard.

For CNGSN & Associates LLP
Chartered Accountants
Firm RegistrationNo.004915S/ S200036
(CHINNSAMY GANESAN)
Place: Chennai - 34Partner
Date: 28th May 2019Membership No. 027501

ANNEXURE A TO INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1 under `Report on other legal and regulatory requirements' section of our report to the members of Dharani Sugars and Chemicals Limited of even date)

1. In respect of the Company's fixed assets:

(a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The Company has a program of verification to cover all the items of fixed assets in a phased manner over a period of three years which in our opinion is reasonable having regard to the size of the Company and the nature of its assets.

Pursuant to the program certain fixed assets were physically verified by the management during the year. According to the information and explanations given to us no material discrepancies were noticed on such verification

(c) According to the information and explanations given to us the records examined by us and based on the examination of the conveyance deeds provided to us we report that the title deeds comprising all the immovable properties of land and buildings which are freehold are held in the name of the Company as at the balance sheet date.

In respect of immovable properties of land and building that have been taken on lease and disclosed as fixed assets in the financial statements the lease agreements are in the name of the Company.

2. The inventory has been physically verified by the management during the year. In our opinion the frequency of such verification is reasonable. According to the information and explanations given to us and as examined by us no material discrepancies were noticed on such verification.

3. According to information and explanation given to us the company has not granted any loan secured or unsecured to companies firms limited liability partnerships or other parties covered in the register required under section 189 of the Companies Act 2013. Accordingly paragraph 3 (iii) of the order is not applicable.

4. In our opinion and according to information and explanation given to us the company has not granted any loans or provided any guarantees or given any security to which the provision of section 185 of the companies Act are applicable.

In respect of investments made by the Company the Company had complied with the provisions of section 186 of the Companies Act 2013.

5. In our opinion and according to the information and explanations given to us the company has not accepted any deposits and accordingly paragraph 3 (v) of the order is not applicable.

6. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 of the Act and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However we have not carried out a detailed examination of the same.

7. According to the information and explanations given to us in respect of statutory dues:

(a) The Company has generally been regular in depositing undisputed statutory dues including provident fund employees' state insurance income tax sales tax service tax value added tax goods and services tax customs duty excise duty cess and other material statutory dues applicable to it with the appropriate authorities;

(b) There were no undisputed amounts payable in respect of provident fund employees' state Insurance income tax sales tax service tax value added tax goods and services tax customs duty excise duty cess and other material statutory dues in arrears as at March 31 2019 for a period of more than six months from the date they became payable; and

(c) The details of dues of income tax sales tax service tax excise duty goods and services tax and value added tax which have not been deposited as at March 31 2019 on account of dispute are given below:

Name of the StatuteNature of duesAmount (Rs. in lakhs)Period to which the amount relatesForum where the dispute is pending
Finance Act 1994Service Tax on Goods Transport Agency87.95April 2008 to April 2013CESTAT - Chennai
Central Excise Act 1944CENVAT credit on Capital goods85.37Sep 2008 to Feb 2010CESTAT- Chennai

8. According to the information and explanation given to us and records examined by us the Company has defaulted in repayment of dues to banks financial institutions and government as detailed in Appendix I to this report. The Company does not have any dues to debenture holders during the year.

9 In our opinion and according to the information and explanations given to us the term loans taken by the Company have been applied for the purpose for which they were raised. The Company has not raised any money by way of initial public offer or further public offer (including debt instruments) during the year

10 To the best of our knowledge and according to the information and explanations given to us no fraud by the Company or no material fraud on the Company by its of cers or employees has been noticed or reported during the year.

11 In our opinion and according to the information and explanations given to us the Company has paid/ provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

12 The Company is not a Nidhi Company and accordingly Paragraph 3 (xii) of the order is not applicable to the Company.

13 According to the information and explanations given to us and based on our examination of the records of the company transactions with the related parties are in compliance with section 177 and 188 of the Act. Where applicable the details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

14 According to the information and explanations given to us and based on our examination of the records of the company the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly paragraph 3(xiv) of the order is not applicable.

15 According to the information and explanations given to us and based on our examination of the records of the company the company has not entered into non-cash transactions with directors or persons connected with them. Accordingly paragraph 3(xv) of the order is not applicable.

16 According to the information and explanations given to us and based on our examination of the records of the company the company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

For CNGSN & Associates LLP
Chartered Accountants
Firm Registration No.004915S/ S200036
(CHINNSAMY GANESAN)
Place : Chennai - 34Partner
Date : 28th May 2019Membership No. 027501

Annexure B to the Independent Auditor's Report

(Referred to in paragraph 2 (f) under `Report on other legal and regulatory requirements' section of our report to the Members of Dharani Sugars and Chemicals Limited of even date)

Report on the internal financial controls over financial reporting under clause (i) of sub - section 3 of section 143 of the Companies Act 2013 (the Act)

We have audited the internal financial controls over financial reporting of Dharani Sugars and Chemicals Limited (the Company) as at March 31 2019 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

Management's responsibility for internal financial controls

The board of directors of the Company is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Companies Act 2013.

Auditors' responsibility

Our responsibility is to express an opinion on the internal financial controls over financial reporting of the Company based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note) issued by the Institute of Chartered Accountants of India and the standards on auditing prescribed under Section 143 (10) of the Companies Act 2013 to the extent applicable to an audit of internal financial controls. Those standards and the guidance note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting were established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement in the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's internal financial control system over financial reporting.

Meaning of internal financial controls over financial reporting

A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition use or disposition of the company's assets that could have a material effect on the financial statements.

Limitations of internal financial controls over financial reporting

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

Opinion

In our opinion and according to the information and explanations given to us the Company has in all material respects an adequate internal financial control system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31 2019 based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For CNGSN & Associates LLP
Chartered Accountants
Firm Registration No.004915S/ S200036
(CHINNSAMY GANESAN)
Place : Chennai - 34Partner
Date : 28th May 2019Membership No. 027501

   

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