To the Members of FDC Limited
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of FDC Limited ("theCompany") which comprise the standalone balance sheet as at 31st March 2019 and thestandalone statement of profit and loss (including other comprehensive income) standalonestatement of changes in equity and standalone statement of cash flows for the year thenended and notes to the standalone financial statements including a summary of thesignificant accounting policies and other explanatory information (hereinafter referred toas "Standalone Financial Statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31st March 2019 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 Auditors' Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion on the standalone financial statements.
Key Audit Matters
Key audit matters ('KAM') are those matters that in our professional judgement wereof most significance in our audit of the standalone financial statements of the currentperiod. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.
Description of Key Audit Matters
|Revenue recognition ||How the matter was addressed in our audit |
| ||Our procedures included the following: |
|The Company recognises revenue from the sales of pharmaceutical products when control over goods is transferred to a customer. The actual point in time when revenue is recognised varies depending on the specific terms and conditions of the sales contracts entered into with customers. The Company has a large number of customers operating in various geographies and sales contracts with customers have a variety of different terms relating to the recognition of revenue the entitlement to sales discounts the right of return and price adjustments. || Assessing the appropriateness of the policies in respect of revenue recognition by comparing with applicable accounting standards; |
| || Evaluating the design testing the implementation and operating effectiveness of the Company's internal controls including general IT controls and key IT application controls over recognition of revenue and measurement of discounts and schemes in the system; |
|We have identified recognition of revenue as a key audit matter as revenue is a key performance indicator and there is a risk of revenue being fraudulently overstated arising from pressure to achieve performance targets as well as meeting external expectations. || Performing substantive testing (including year-end cut-off testing) by selecting samples of revenue transactions recorded during and after the year and verifying the underlying documents which included sales invoices/ contracts and dispatch/shipping documents. Obtaining and assessing appropriateness of positions for returns and incentives; |
| || Testing controls over review of contracts and revenue recognition; and |
| || Assessing manual journals posted to revenue to identify unusual items not already covered. |
|Litigations claims and contingencies ||How the matter was addressed in our audit |
|See note 40 to the standalone financial statements ||Our procedures included the following: |
|The Company operates in multiple jurisdictions in the pharmaceutical industry which is heavily regulated resulting in increased exposure to litigation risk. The Company is involved in a number of litigations/ legal actions. || Evaluating the design and testing the operating effectiveness of controls in respect of the recognition and measurement of provisions towards litigation and claims; |
|These provisions are based on judgements and accounting estimates made by management reflect in determining the likelihood and magnitude of an unfavorable outcome on the claims. Accordingly unexpected adverse outcomes could significantly impact the Company's reported profit and balance sheet position. || Corroborating management's assessment by making enquiries with the in-house legal compliance officer; |
| || verifying correspondence orders and appeals in respect of open litigation; |
| || Obtaining confirmations from external lawyers where relevant and/ or evaluating legal opinions obtained by the management; |
| || We have also involved our direct tax experts to evaluate management's assessment of possible outcome of dispute; |
| || Evaluating significant adjustments to legal provisions recorded during the year to determine if they were indicative of management bias; and |
| || Evaluating adequacy of disclosures given in the financial statements. |
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditors' reportthereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Management's Responsibility for the Standalone Financial Statements
The Company's management and Board of Directors are responsible for the matters statedin Section 134(5) of the Act with respect to the preparation of these standalone 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) prescribed under Section 133 of the Act.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
In preparing the standalone financial statements 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 management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
Board of Directors is also responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit 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 standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i)of the Act 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 reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematers that were of most significance in the audit of standalone financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditors' report unless law or regulation precludes public disclosure about the matteror 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.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors' Report) Order 2016 (the Order')issued by the Central Government in terms of Section 143 (11) of the Act we give in the"Annexure A" a statement on the matters specified in the paragraphs 3 and 4 ofthe Order to the extent applicable.
(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 standalone balance sheet the standalone statement of profit and loss (includingother comprehensive income) the standalone statement of changes in equity and thestandalone statement of cash flows dealt with by this Report are in agreement with thebooks of account;
d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under Section 133 of the Act;
e) On the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in terms of Section164(2) of the Act; and
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 opinionand to the best of our information and according to the explanations given to us:
i) The Company has disclosed the impact of pending litigations as at 31st March 2019 onits financial position in its standalone financial statements - Refer note 40 to thestandalone financial statements;
ii) The Company did not have any other long-term contracts including derivativecontracts 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 during the year ended 31st March2019; and
iv) The disclosures in the standalone financial statements regarding holdings as wellas dealings in specified bank notes during the period from 8th November 2016 to 30thDecember 2016 have not been made in these financial statements since they do not pertainto the financial year ended 31st March 2019.
(C) With respect to the matter to be included in the Auditors' Report under Section197(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
Firm's Registration No: 101248W/W-100022
VIKAS R. KASAT
Membership No: 105317
Place : Mumbai
Date : May 24 2019
Annexure A to the Independent Auditors' Report -31st March 2019
With reference to the Annexure A referred to in the Independent Auditors' Report to themembers of the Company on the standalone financial statements for the year ended 31stMarch 2019 we report the following:
(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 in a phased manner at reasonable intervals. In ouropinion this periodicity of physical verification is reasonable having regard to the sizeof the Company and the nature of its fixed assets. Pursuant to the programme certainfixed assets were physically verified by the Management during the year. In our opinionand according to the information and explanations given to us no material discrepancieswere noticed on such verification.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has applied to the relevantauthorities for transfer of freehold land acquired pursuant to the Scheme of amalgamationwith Anand Synthochem Limited in its name. Title deeds of other immoveable properties(other than leasehold land) as disclosed in note 2 to the standalone financial statementsare held in the name of the Company. In respect of leasehold lands we have verified thelease agreements duly registered with the appropriate authorities as disclosed in note 2to the standalone financial statements.
(ii) The inventory except for stocks lying with third parties has been physicallyverified by the management during the year. For stocks lying with third parties at theyear-end written confirmations have been obtained. In our opinion the frequency of suchverification is reasonable. The discrepancies noticed on verification between the physicalstocks and the book records were not material and these have been properly dealt with inthe books of accounts.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under Section 189 of theAct. Accordingly paragraph 3(iii) (a) (b) and (c) of the Order is not applicable to theCompany.
(iv) In our opinion and according to the information and explanation given to us theCompany has not granted any loans or provided any guarantees or security to the partiescovered under Section 185 of the Act. The Company has complied with the provisions ofSection 186 of the Act in respect of the loans and investments made. The Company has notprovided any guarantees and security to the parties covered under Section 186 of the Act.
(v) In our opinion and according to the information and explanations given to us theCompany has not accepted deposits as per the directives issued by the Reserve Bank ofIndia and the provisions of Sections 73 to 76 or any other relevant provisions of the Actand the rules framed there under. Accordingly paragraph 3(v) of the Order is notapplicable to the Company.
(vi) We have broadly reviewed the books of accounts maintained by the Company pursuantto the rules prescribed by the Central Government for maintenance of cost records underSection 148 (1) of the Act in relation to products manufactured and are of the opinionthat prima facie the prescribed accounts and records have been made and maintained.However we have not made a detailed examination of the cost records with a view todetermine whether they are accurate or complete.
(vii) (a) According to the information and explanations given
to us and on the basis of our examination of the records of the Company amountsdeducted/ accrued in the books of account in respect of undisputed statutory duesincluding Provident Fund Employees' State Insurance Income-tax Goods and Service TaxDuty of Customs Cess and other material statutory dues have been regularly depositedduring the year by the Company 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 Goods andService Tax Duty of Customs Cess and other material statutory dues were in arrears as at31st March 2019 for a period of more than six months from the date they became payable.
Also refer note 41 to the standalone financial statements.
(b) According to the information and explanations given to us there are no dues ofDuty of Customs which have not been deposited with the appropriate authorities on accountof dispute. According to the information and explanations given to us there are no duesof Income Tax Goods and Service Tax Duty of Excise Service Tax and Value Added Tax asat 31st March 2019 which have not been deposited with the appropriate authorities onaccount of any dispute except as stated below:
|Name of the Statute ||Nature of the Dues ||Amount of demand under dispute (Rs. In lakhs) ||Amount paid under protest (Rs. in lakhs) ||Amount under dispute not deposited (Rs. In lakhs) ||Period to which the amount relates ||Forum where the dispute Is pending |
|Gujarat Sales Tax Act /Uttar Pradesh Sales Tax Act/West Bengal Sales Tax Act/ Maharashtra Sales Tax Act ||Tax/ Penalty/ Interest ||71.70 ||11.71 ||59.99 ||A.Y. 2002-03 2003-04 ||Sales Tax Appellate Tribunal |
| || ||27.10 ||14.11 ||12.98 ||A.Y. 2010-11 ||Joint Commissioner (Appeals) |
| || ||19.10 || ||19.10 ||A.Y. 2002-032003 2006-07 ||Revisional Board - Commercial Tax |
|Central Excise Ad/Service Tax ||Duty/ Penalty/ Interest ||56.98 || ||56.98 ||April 2000- Dec 2001 Nov 2002-June 2003 Dec 2003-Oct 2004 April 2005-Sep 2006 April 2007 -March 2008 ||Custom Excise & Service tax Appellate Tribunal |
|GST ||Duty/ Penalty/ Interest ||19.55 || ||19.55 ||April 2017-June 2017 ||Asst. Comm. CGST |
| || ||34.12 || ||34.12 ||April 2005-Sep 2005 ||Asst. Commissioner of Service Tax |
|Central Excise Ad/Service Tax ||Duty / Penalty/ Interest ||28.56 || ||28.56 ||April 2005-Sep 2006 ||High Court |
|Income-tax Ad 1961 ||Tax/ Interest/ Penalty ||2499.68 ||2101.50 ||398.18 ||A.Y. 2009-102010-11 2012-132013-14 2015-162016-17 2017-182018-19 ||Commissioner of Income tax (Appeals) |
(viii) In our opinion and according to the information and explanations given to usand based on the records of the Company the Company has not defaulted in the repayment ofdues to the government. The Company does not have any loans or borrowings from any banksfinancial institutions or debenture holders during the year.
(ix) According to the information and explanations given to us and based on ourexamination of records of the Company the Company has not raised any moneys by way ofinitial public offer or further public offer (including debt instruments) or term loansduring the year.
(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 we have 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 the related parties are incompliance with Sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the standalone financial statements as required byapplicable 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. Accordingly paragraph 3(xiv) of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with them. Accordingly paragraph 3(xv)of the Order is not applicable to the Company.
(xvi) In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934. Accordingly paragraph 3(xvi) of the Order is not applicable to the Company.
For B S R & Co. LLP
Firm's Registration No: 101248W/W-100022
VIKAS R. KASAT
Membership No: 105317
Place : Mumbai
Date : May 24 2019
Annexure B to the Independent Auditors' Report on the standalone financial statementsof FDC Limited for the year ended 31st March 2019
Report on the internal financial controls with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013
(Referred to in paragraph A(f) under 'Report on Other Legal and RegulatoryRequirements' section of our report of even date)
We have audited the internal financial controls with reference to standalone financialstatements of FDC Limited ("the Company") as of 31st March 2019 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat 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 31st March 2019 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 for establishingand maintaining internal financial controls based on the internal control with referenceto financial statements criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note. 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 (hereinafter referred to as "the Act").
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 if 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 standalone financial statements whether due to fraud orerror.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to financial statements.
Meaning of Internal Financial Controls with Reference to Financial Statements
A Company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith 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 and fairlyreflect the transactions and dispositions of the assets of the Company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the Company are being made only in accordance withauthorisations of management and directors of the Company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the Company's assets that could have a material effect on the financialstatements.
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
Firm's Registration No: 101248W/W-100022
VIKAS R. KASAT
Membership No: 105317
Place : Mumbai
Date : May 24 2019