You are here » Home » Companies » Company Overview » Fairchem Organics Ltd

Fairchem Organics Ltd.

BSE: 543252 Sector: Industrials
NSE: FAIRCHEMOR ISIN Code: INE0DNW01011
BSE 00:00 | 27 Jan 1984.30 -15.80
(-0.79%)
OPEN

2225.00

HIGH

2225.00

LOW

1959.80

NSE 00:00 | 27 Jan 1987.50 -18.35
(-0.91%)
OPEN

1995.00

HIGH

2000.00

LOW

1945.55

OPEN 2225.00
PREVIOUS CLOSE 2000.10
VOLUME 426
52-Week high 2290.00
52-Week low 511.00
P/E 34.25
Mkt Cap.(Rs cr) 2,584
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 2225.00
CLOSE 2000.10
VOLUME 426
52-Week high 2290.00
52-Week low 511.00
P/E 34.25
Mkt Cap.(Rs cr) 2,584
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Fairchem Organics Ltd. (FAIRCHEMOR) - Auditors Report

Company auditors report

To the Members of Fairchem Organics Limited Report on the Audit of the FinancialStatements Opinion

We have audited the financial statements of Fairchem Organics Limited (“theCompany”) which comprise the balance sheet as at 31 March 2021 and the statement ofprofit and loss (including other comprehensive income) statement of changes in equity andstatement of cash flows for the year then ended and notes to the financial statementsincluding a summary of the significant accounting policies and other explanatoryinformation.

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 (“Act”) in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2021 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor’s Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion on the financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance 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.

Revenue recognition Timing of recognising revenue See note 2 (c) 2 (v) 30 and 50 tothe financial statements

The key audit matter How the matter was addressed in our audit
Revenue from the sale of finished goods is recognized when control over finished goods is transferred to the customer. The Company has various customers with differing terms of trade which increases the risk of error in timing of revenue recognition. The actual point in time when revenue is recognized varies depending on the specific terms and conditions of the contracts with the customers. In view of the significance of the matter we applied the following audit procedures among others in this area to obtain sufficient audit evidence:
We have identified the risk of revenue being recognized in incorrect period on account of variation in the timing of transfer of control as a key audit matter due to the financial significance arising from pressure to achieve performance targets and meeting external expectations at the year end. Assessing Company’s revenue recognition accounting policies by comparing with applicable accounting standards and their consistent application to the significant sales contracts
Pursuant to the Scheme Oleo Chemical and Neutraceutical business of Fairchem Speciality Limited was demerged and vested into the Company. The Scheme with the appointed date as the closing of business hours of 31 March 2019 has been approved by the National Company Law Tribunal (‘NCLT’) vide its order dated 30 June 2020. The Company has accounted for this acquisition as business combination of entities under common control with effect from 1 April 2019. Testing the design implementation and operating effectiveness of key internal controls over timing of recognition of revenue from sale of products.
The assets and liabilities acquired are recognised at their carrying amounts. The difference between the carrying amount of assets and liabilities acquired and the consideration discharged by way of the new equity shares issued to the shareholders of the transferor company is recorded as capital reserve. Performing substantive testing of revenue recognized near the year-end by selecting samples of [sales vouchers] recorded close to the year end on a random basis. For the samples selected verifying the customer contracts invoice delivery note to assess the appropriateness of revenue recognition in accordance with the contractual terms agreed with the customers and testing timeliness of revenue recognition by comparing individual sample sales transactions to underlying contracts
This is a key audit matter as the scheme has a material and pervasive impact on the financial statements of the Company. Evaluating revenue overstatement or understatement by assessing Company’s key judgments in interpreting contractual terms
Circulating balance confirmation requests to customers on a random sample basis and examining reconciliations in case of differences
Assessing manual journals posted to revenue to identify unusual items
Considering the adequacy of disclosures in respect of judgements exercised in recognising revenue in the financial statements.
In view of the significance of the matter we applied the following audit procedures among others in this area to obtain sufficient audit evidence:
Reading the scheme and the NCLT order documents to understand its key terms and conditions
Assessing the accounting policy of business combination of entities under common control by comparing with applicable accounting standard
Examining the accounting entries for the Scheme in accordance with applicable accounting standard and the NCLT order
Assessing the adequacy of the disclosures in accordance with the applicable accounting standards.

Other Information

The Company’s management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in theCompany’s annual report 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 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.

Management's and Board of Directors’ Responsibility for the Financial Statements

The Company’s Management and Board of Directors are responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these financialstatements that give a true and fair view of the state of affairs profit/loss and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring accuracy and completeness of the accounting records relevant tothe preparation and presentation of the financial statements that give a true and fairview and are free from material misstatement whether due to fraud or error.

In preparing the financial statements the Management and Board of Directors areresponsible for assessing the Company’s ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the Board of Directors either intends to liquidate the Companyor to cease operations or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company’s financialreporting process.

Auditor’s Responsibilities for the Audit of the 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 ahigh level of assurance but is not a guarantee that an audit conducted in accordance withSAs will always detect a material misstatement when it exists. Misstatements can arisefrom fraud 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 financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing 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 reasonableness ofaccounting estimates and related disclosures in the financial statements made by theManagement and Board of Directors.

Conclude on the appropriateness of the Management and Board of Directors use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company’s ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor’sreport to the related disclosures in the financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor’s report. However future events or conditionsmay cause the Company to cease to continue as a going concern.

Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions 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 alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships 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 thematter or when 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.

Other Matter

The audited financial statements of the Company for the corresponding year ended 31March 2020 prepared in accordance with Ind AS were audited by the predecessor auditorswho expressed an unmodified opinion on those audited financial statements vide theirreport dated 23 June 2020.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors’ Report) Order 2016 (“theOrder”) issued by the Central Government in terms of section 143 (11) of the Act wegive in the “Annexure A” a statement on the matters specified in paragraphs 3and 4 of the Order to the extent applicable.

2. (A) As required by Section 143(3) of the Act we report that:

a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.

c) The balance sheet the statement of profit and loss (including other comprehensiveincome) the statement of changes in equity and the statement of cash flows dealt with bythis Report are in agreement with the books of account.

d) In our opinion the aforesaid financial statements comply with the Ind AS specifiedunder section 133 of the Act.

e) On the basis of the written representations received from the directors as on 31March 2021 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2021 from being appointed as a director in terms of Section164(2) of the Act.

f) 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”.

(B) With respect to the other matters to be included in the Auditors’ Report inaccordance with Rule 11 of the Companies

(Audit and Auditors) Rules 2014 in our opinion and to the best of our information andaccording to the explanations given to us:

i. The Company has disclosed the impact of pending litigations as at 31 March 2021 onits financial position in its financial statements - Refer Note 45 to the financialstatements.

ii. The Company did not have any long-term contracts including derivative contracts forwhich 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.

iv. The disclosures in the financial statements regarding holdings as well as dealingsin specified bank notes during the period from 8 November 2016 to 30 December 2016 havenot been made in these financial statements since they do not pertain to the financialyear ended 31 March 2021.

(C) With respect to the matter to be included in the Auditors’ Report undersection 197(16):

In our opinion and according to the information and explanations given to us theremuneration paid by the company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W / W-100022
Rupen Shah
Partner
Mumbai Membership No. 116240
7 June 2021 UDIN: 21116240AAAABR8336

ANNEXURE A TO INDEPENDENT AUDITORS’ REPORT

Annexure A to the Independent Auditors’ report on the financial statements ofFairchem Organics Limited for the year ended 31 March 2021.

The Annexure referred to in our Independent Auditors’ Report to the members of theCompany on the financial statements for the year ended 31 March 2021 we report that: (i)

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

b) The Company has a regular programme of physical verification of its fixed assets bywhich all fixed assets are verified by the management in a phased manner over a period ofthree years. In accordance with this programme certain fixed assets were verified duringthe year and no material discrepancies were noticed on such verification. In our opinionthis periodicity of physical verification is reasonable having regard to the size of theCompany and the nature of its assets.

c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deed/ transfer deed/ conveyancedeed provided to us we report that the title deeds of immovable properties are held inthe name of the Company. In respect of the immovable properties of land that have beentaken on lease and disclosed as fixed asset (right to use assets) in the financialstatements the title deeds are in the name of Fairchem Speciality Limited from which theCompany has taken over the business. Further the Company has already initiated theformalities of registration in the name of the Company.

Particular of Land Gross Block as at 31-3-2021 Net Block as at 31-3-2021 Remarks
(Rs in Lacs) (Rs in Lacs)
i. Leasehold Land (one case) 459.40 427.97 The title deeds are in the name of Fairchem Speciality Limited from which the Company has taken over the business

(ii) The inventory except goods-in-transit has been physically verified by themanagement during the year. In our opinion the frequency of such verification isreasonable. The discrepancies noticed on verification between the physical stocks and thebook records were not material and have been appropriately dealt with in the books ofaccounts.

(iii) In our opinion and according to the information and explanations given to us theCompany has not granted any loans secured or unsecured to companies firms limitedliability partnerships or other parties covered in the register maintained under Section189 of the Act. Accordingly paragraphs 3 (iii) (a) (b) and (c) of the Order are notapplicable to the Company.

(iv) In our opinion and according to the information and explanations given to us theCompany has not granted any loans or provided any guarantees or security to the partiescovered under Section 185 and Section 186 of the Act during the year.

(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public in accordance with the provisions ofsection 73 to 76 or any other relevant provisions of the Act and the rules framed thereunder. Accordingly paragraph 3(v) of the Order is not applicable to the Company.

(vi) We have broadly reviewed the records maintained by the Company pursuant to therules prescribed by the Central Government for maintenance of cost records undersub-section 1 of section 148 of the Act and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. However we have not made adetailed examination of the records with a view to determine whether they are accurate orcomplete.

(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/accrued in the books ofaccount in respect of undisputed statutory dues including Provident Fund Employees’State Insurance Duty of Customs and other material statutory dues have been generallyregularly deposited with the appropriate authorities though there have been slight delaysin depositing Goods and Service Tax and Income Tax with the appropriate authorities.

According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees’ State Insurance Income-Tax Goodsand Service Tax Duty of Customs and other material statutory dues were in arrears as at31 March 2021 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us there are no dues ofIncome-tax Sales Tax Service Tax Goods and Service Tax Duty of customs Duty ofExcise Value Added Tax as at 31 March 2021 which have not been deposited with theappropriate authorities on account of any dispute other than those mentioned below-

Name of the statute Nature of dues Amount Period to which the amount relates Forum where the dispute is pending
Service Tax The Finance Act 1994 Demand in respect of Cenvat credit reversal 3.56 Feb 13 to Nov 14 The Commissioner (Appeal) Central Excise Ahmedabad
2.25 Dec 14 to Aug 15
4.04 Feb 15 to Mar 16 Customs Excise & Service Tax Appelate Tribunal.
Central Sales Tax Act 1956 and the Gujarat Demand in respect of 4.71 Year 2011-12 Dy. Commissioner of Commercial Tax- Appeal
Value Added Tax 2003 Input Tax credit 8.22 Year 2012-13 Ahmedabad
1.77 Year 2014-15 Dy. Commissioner of Sales Tax - Appeal Ahmedabad
CGST Act 2017 SGST Act 2017 and IGST Act 2017 Expiry of validity of E way bill 7.26 Year 2020-21 Dy. Commissioner of State Tax - Appeal Ahmedabad

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of dues to any banks during the year. TheCompany did not have any outstanding dues to financial institutions debenture holders andGovernment during the year. Reserve Bank of India has issued a circular dated 27 March2020 on COVID-19- Regulatory Package. The circular provides that companies may decide toopt for a moratorium period for repayment of term loans / working capital financingfacilities etc. Basis the above regulatory package the Company has opted for moratoriumperiod for repayment of term loans.

(ix) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not raised any money by way ofinitial public offer further public offer (including debt instruments) during the year.In our opinion and according to information and explanations given to us the term loanshave been applied by the Company during the year for the purposes for which they wereraised.

(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 officers or employeesnoticed or reported during the year nor have we been informed of any such case by themanagement.

(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V to the Act.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is notapplicable to the Company.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with related parties are incompliance with provisions of Section 177 and 188 of the Act where applicable. The detailsof such transactions have been disclosed in the notes to the financial statements asrequired by the applicable Indian accounting standards.

(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. However the shares issued under the Scheme is not considered for reportingunder this clause. Accordingly paragraph 3(xiv) of the Order is not applicable to theCompany.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.

(xvi) According to the information and explanations given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.Accordingly paragraph 3(xvi) of the Order is not applicable to the Company.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W / W-100022
Rupen Shah
Partner
Mumbai Membership No. 116240
7 June 2021 UDIN: 21116240AAAABR8336

ANNEXURE B TO INDEPENDENT AUDITORS’ REPORT

Annexure B to the Independent Auditors’ report on the financial statements ofFairchem Organics Limited for the year ended 31 March 2021.

Report on the internal financial controls with reference to the aforesaid financialstatements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013(Referred to in paragraph 2(A)(f) under ‘Report on Other Legal and RegulatoryRequirements’ section of our report of even date)

Opinion

We have audited the internal financial controls with reference to financial statementsof Fairchem Organics Limited (“the Company”) as of 31 March 2021in conjunctionwith our audit of the financial statements of the Company for the year ended on that date.In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at 31 March 2021 based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (the “Guidance Note”).

Management’s Responsibility for Internal Financial Controls

The Company’s management and the Board of Directors are responsible forestablishing and maintaining internal financial controls based on the internal financialcontrols with reference to financial statements criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note.These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company’s policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013 (hereinafterreferred to as “the Act”).

Auditors’ Responsibility

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 and the Standards on Auditing prescribed undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all 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 such internal financial controlsassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor’s judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company’s internal financial controlswith reference 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 generally accepted accounting principles. A company's internal financial controlswith reference to financial statements include 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 authorisations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition 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 controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W / W-100022
Rupen Shah
Partner
Mumbai Membership No. 116240
7 June 2021 UDIN: 21116240AAAABR8336

.