Gokul Agro Resources Limited
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of GOKUL AGRO RESOURCES LIMITED("the Company") which comprise the Balance Sheet as at 31st March2020 and the Statement of Profit and Loss (including Other Comprehensive Income)Statement of Changes in Equity and Statement of Cash Flows for the year then ended andnotes to the Financial Statements including a summary of Significant Accounting Policiesand other Explanatory Information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give a t rue and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2020 and profit changes in equity and its cash flows for the year endedon that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of E thics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Information other than Financial Statements and Auditor's Report Thereon
The company's Board of Directors are responsible for the preparation and presentationof the other information. The other information comprises the information included in theManagement Discussion and Analysis Board's Report including the Annexure to the Board'sReport Share Holder's Information etc. but does not include the standalone financialstatement and auditor's 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 readother information and in doing so consider whether the other information is materiallyinconsistent with the standalone financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to be materially misstated. If based on the workwe have performed we conclude that there is material misstatement of this information weare required to report that fact. We have nothing to report in this regard.
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.
There are no key audit matters to communicate in our report.
Emphasis of Matter
We draw your attention to the Note No. 35 to the standalone financial statementswhich explains the management's assessment of the financial impact due to the lock downand other restrictions related to Covid-19 pandemic. Our opinion is not modified inrespect of this matter.
Further due to Covid-19 impact and national wide lockdown we are unable to physicallyverify the Inventory. However management has carried out the physical verification ofinventory. We have therefore relied on the related alternative audit procedures so as toenable us to issue an opinion on the existence and conditions of inventory at the yearend. Our opinion is not modified in respect of this matter.
Management's Responsibility for the Standalone Financial Statements
The Board of Directors of the Company are responsible for the preparation andpresentation of the statement that gives a true and fair view of the net profit and othercomprehensive income of the company and other financial information in accordance with theapplicable accounting standards prescribed under section 133 of the act.
This responsibility also includes maintenance of adequate records in accordance withthe provisions of the act for safeguarding of the assets of the company and for preventingand detecting fraud and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentatio n of the statement that give a trueand fair view and are free from material misstatement whether due to fraud or error.
While preparing the financial statements considering the nature of business of theentity the management needs to make a detailed assessment (to the extent possible basedon the information available) of the impact of COVID-19 on the items components of thefinancial statements including disclosures in the financial statements.
The Board of Directors are also responsible for assessing the Company's ability tocontinue as going concern disclosing as applicable matters related to going concern andusing the going concern basis of accounting unless the Board of Directors either intend toliquidate the Company or to cease operations or has no realistic alternative but to doso. The Board of Directors are also responsible for overseeing the financial reportingprocess of the Company.
The management's responsibility also includes making appropriate adjustments to thefinancial statements and ensuring necessary disclosures such as disclosures of subsequentevents risks and uncertainties and how ev ents and conditions may impact futureoperating results cash flows and financial position of the entity. Other disclosures mayinclude business risk factors and management's discussion and analysis of resultsliquidity and capital resources.
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 a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As a part of an audit in accordance with SAs we exercise professional judgment andmaintain profess ional skepticism throughout the audit.
(a) 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.
(b) Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
(c) Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
(d) Conclude the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe Financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the company to cease to continue asa going concern.
(e) Evaluate the overall presentation structure and content of the financialstatement including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that a chieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the ke y audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
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 ofthe Companies Act 2013 we give in the "Annexure - A" a statement onthe matters specified in paragraphs 3 and 4 of the Order to the extent applicable.
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 and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
(e) With respect to the matters to be included in the auditor's report in accordancewith 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 information andexplanations given to us the remuneration paid by the company to its directors during theyear is in accordance with the provisions of section 197 of the Act.
(f) On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2020 from being appointed as a director in termsof Section 164(2) of the Act.
(g) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure - B".
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended :
In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act.
(i) With respect to the other matters to be included in the Auditor's 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) TheCompany has pending litigation of Rs. 4.69 lakhs and 96.71 lakhs with respect to valueadded tax for the financial year 2015-16 and 2016-17 respectively. The said litigationwould not have any adverse impa ct on its financial position.
(ii) The Company did not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses.
(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the company.
For Surana Maloo & Co.
Chartered Accountants Firm Reg. No. 112171W
Per S.D. Patel
Partner Membership No.: 037671 UDIN - 20037671AAAACY3644
Place: Ahmedabad Date : June 05 2020
Annexure to the Independent Auditors' Report of even date on the Financial Statementsof GOKUL AGRO RESOURCES LIMITED
The Annexure referred to in paragraph 1 under the heading "Report on other legaland regulatory requirements" of our report of even date
(i) (a) The Company has maintained proper records showing full particulars includingQuantitative details and situation of fixed assets relating to the company.
(b) The Property Plant and Equipments (fixed assets) have been physically verifiedduring the year by the Management in accordance with programme of physical verificationwhich in our opinion provides for physical verification of all fixed assets at areasonable interval having regard to size of the Company and nature of fixed assets.According to the Information and explanation given to us no material discrepancies werenoticed on such verification. Due to the impact of Covid-19 and national wide lockdown weare unable to physically verify the property plant and equipments and we have relied onthe method and procedures followed by the management for the verification of propertyplant and equipments.
(c) Based upon the audit procedure performed and according to the records of thecompany title deeds of few of the immovable properties transferred to the company underthe scheme of the arrangement as approved by the Hon'ble High Court of Gujarat are stillin the name of the Demerged Company "Gokul Refoils and Solvent Limited" andtitle deeds are in the process of transfer in the name of the Company.
(ii) The Inventories of Raw Materials Work-in-Progress Finished Goods Stores andSpares have been physically verified by the management. In our opinion the frequency ofverification is reasonable. On the basis of our examination of the records of theinventory we are of opinion that the discrepancies noticed on verification betweenphysical stock and book records were not material and have been properly dealt with thebooks of account.
Further due to Covid-19 impact and national wide lockdown we are unable to physicallyverify the Inventory. However management has carried out the physical verification ofinventory. We have therefore relied on the related alternative audit procedures so as toenable us to issue an opinion on the existence and conditions of inventory at the yearend.
(iii) The Company has granted loans secured or unsecured to the companies firms orother parties covered in the register maintained under section 189 of the Companies Actthe outstanding balance as at 31st March 2020 is as under.
|Sr.No. Name of the Parties ||Amount (Rs. In Lakhs) ||Remarks |
|1 Gokul Refoils & Solvent Limited ||86.35 ||Loan balance transferred to the company on |
|2 Gujarat Gokul Power Limited ||2038.55 ||account of demerger scheme approved by the |
|3 Gokul Overseas ||322.48 ||Hon'ble High Court of Gujarat. |
(a) The terms and conditions of the grant of such loans are not prejudicial to theCompany's interest.
(b) The schedule of re-payment of principle and payment of interest has not beenexpressly stipulated as the same is considered to be on mutual demand and in the absenceof such schedule; we are unable to comment on the repayment of receipt of principleamounts.
(c) As no re-payment schedule is expressly agreed there is no overdue principal andinterest.
The Company has not granted any loans secured or unsecured to firms Limited LiabilityPartnerships or other parties covered in the register maintained u/s 189 of the act.
(iv) In respect of loans investments guarantee and security attracting provisions ofsection 185 and 186 of the Companies Act have been complied with by the company.
(v) According to the information and explanations given to us the Company has notaccepted deposits from the public within the meaning of Sections 73 to 76 of the Act andthe rules framed there under. Therefore the reporting requirements of paragraph 3 (v) ofthe Order is not applicable to the Company.
(vi) The Company has made and maintained the cost records as prescribed by the CentralGovernment under section 148(1) of the Act.
(vii)a) According to the information and explanations given to us and on the basis ofour examination of the records of the company in respect of undisputed statutory dues ofCentral Excise Service Tax Sales Tax Goods and Service Tax Income Tax Tax Deducted atSource Tax Collected at Source Professional Tax Cess and other material statutory dueshave been regularly deposited during the year by the company with the appropriateauthorities. According to the information and explanations given to us no undisputedamounts payable in respect of Service Tax Goods and Service Tax Income Tax Tax Deductedat Source Tax Collected at Source Professional Tax Cess and other material statutorydues were in arrears as at March 31 2020 for a period of more than six months from thedate they became payable.
(b) According to the information and explanations given to us and on the basis of ourexamination of the records of the company in respect of disputed statutory dues of CentralExcise Service Tax Sales Tax Goods and Service Tax
Income Tax Tax Deducted at Source Tax Collected at Source Professional Tax Cess andother material statutory dues we report that there are Value Added Tax payable for theFinancial Year 2015-16 and 2016-17 which have not been deposited with the appropriateauthorities on account of any dispute. The details of the same are as under:
|Particulars ||Amount (Rs.) ||Status |
|Value Added Tax FY: 15-16 ||468987/- ||Case Pending with Dy. Commissioner |
|Value Added Tax FY: 16-17 ||9671097/- ||Commercial Tax Appeals |
*Including net amount paid under protest.
Further as per the scheme of demerger as approved by the High Court the company shallbe responsible for any disputed statutory liability of the Gandhidham Undertakings if anypayable by the management of the company.
(viii) Based on our audit procedure and information and explanation given by themanagement we are of the opinion that the company has not defaulted in repayment of loansto the banks.
RBI has issued circular on Covid-19 Regulatory Package. The circular provides that thecompanies may decide to opt for a moratorium period for repayment of term loans/workingcapital financing facilities etc. However interest would continue to be charged for thisperiod the company has not exercised such option.
Further the company has not borrowed or raised any money from debentures holdersduring the year.
(ix) The Company has not raised any moneys by way of initial public offer or furtherpublic offer (including debt instruments).
Accordingly the provisions of clause 3(ix) of the order are not applicable to thecompany.
Further in our opinion and according to the information and explanation given to usand on examination of the balance sheet of the company the term loans were applied forthe purpose for which the loans were obtained.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the Ind AS standalone financial statements and as per the information andexplanations given by the Management We report that no material fraud on or by theCompany has been noticed or reported during the year.
(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 the Company is not a Chit Fund or a Nidhi/Mutual BenefitFund/Society. Therefore the provisions of Clause 3(xii) of the Order are not applicableto the Company.
(xiii) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company all the transactions with related parties arein compliance with Section 177 and 188 of the Act where applicable and also the detailswhich have been disclosed in the Ind AS Standalone Financial Stateme nts as required bythe applicable Indian accounting standard.
(xiv)According to the information and explanations given to us and based on ourexamination of the records of the company the Company has issued redeemablenon-convertible preference shares. The company has complied with the requirement ofsection 42 of the Companies Act 2013.
(xv) In our opinion and according to the information and explanations given to us theCompany has not entered into any non cash transactions with directors or persons connectedwith him. Accordingly reporting requirement of paragraph 3(xv) of the order is notapplicable to the Company.
(xvi)According to the information given and as explained to us the company is notrequired to be registered under section
45 IA of the Reserve Bank of India Act 1934.
Place: Ahmedabad Date : June 05 2020
For Surana Maloo & Co.
(Chartered Accountants) Firm Reg. No: 112171W
Per S.D. Patel
Partner Membership No: 037671 UDIN : 20037671AAAACY3644
ANNEXURE - B
"Annexure B" to the Independent Auditor's Report of even date on theStandalone Ind AS Financial Statements of Gokul Agro Resources Limited Report on theInternal Financial Controls under Clause (i) of Sub-Section 3 of Section 143 of theCompanies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of GOKULAGRO RESOURCES LIMITED ("the Company") (CIN-L15142GJ2014PLC080010) as ofMarch 31st 2020 in conjunction with our audit of the standalone financialstatements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.
Emphasis of Matter
We draw your attention to the paragraph reported in our main audit report i.eIndependent Auditor's Report under the head "Emphasis of Matter" with regard toCovid-19 assessment. Our opinion is not modified in respect of any matter (including thatrelating to Covid-19).
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by the ICAI anddeemed to be prescribed under Section 143(10) of the Act to the extent applicable to anaudit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the ICAI. Those Standards and the Guidance Note require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing 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 judgment 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 controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31st 2020based on the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.
Place: Ahmedabad Date : June 05 2020
For Surana Maloo & Co.
(Chartered Accountants) Firm Reg. No: 112171W
Per S.D. Patel
Membership No: 037671 UDIN : 20037671AAAACY3644
Notes Annexed to and Forming Part of the Standalone Financial Statements
Note: -1: CORPORATE INFORMATION
Gokul Agro Resources Limited (the company) is a public limited company and listed onBombay Stock Exchange (BSE) & National Stock Exchange (NSE) domiciled in India andincorporated under the provisions of the Companies Act 2013. The company is engaged inbusiness of Manufacturing & Trading of Edible & Non-Edible O il Meals and otherAgro Products.
Note: -2: BASIS OF PREPARATION
a) Basis of preparation
These financial statements are prepared in accordance with Indian Accounting Standards(Ind AS) under the historical cost convention on the accrual basis except for certainfinancial instruments which are measured at fair values the provisions of the CompaniesAct 2013 (the Act') (to the extent notified) and guidelines issued by theSecurities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules 2015 andthe relevant amendment rules issued thereafter.
Accounting policies have been consistently applied except where a newly issuedaccounting standard is initially adopted or a revision to an existing accounting standardrequires a change in the accounting policy hitherto in use.
b) Functional and presentation currency
These financial statements are presented in Indian rupee which is the Company'sfunctional currency unless otherwise indicated.
c) Basis of measurement
The financial statements have been prepared on historical cost basis except certainfinancial assets and liabilities which have been measured at fair value defined benefitsplan and contingent consideration. The acco unting policies have been consistently appliedby the Company and are consistent with those used in the previous year.
All assets and liabilities have been classified as current or non-current as per theCompany's norma l operating cycle and other criteria set out in the Schedule III to theAct. Based on the nature of products and the time between acquisition of assets forprocessing and their realization in cash and cash equivalents the Company has ascertainedits operating cycle to be of 12 months for the purposes of current / non-currentclassification of assets and liabilities.
Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/non-current classification. An asset is treated as current when it is: a. Expected to berealized or intended to be sold or consumed in normal operating cycle b. Held primarilyfor the purpose of trading c. Expected to be realized within twelve months after thereporting period or
d. Cash or cash equivalent unless restricted from being exchanged or used to settle aliability for at least twelve months after the reporting period
All other assets are classified as non-current. A liability is current when: a. It isexpected to be settled in normal operating cycle b. It is held primarily for the purposeof trading c. It is due to be settled within twelve months after the reporting period or
d. There is no unconditional right to defer the settlement of the liability for atleast twelve months after the reporting period
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets andliabilities.
Note: -2A: USE OF ESTIMATES
The preparation of financial statements requires the use of accounting estimates whichby definition will often equal the actual results. Management also needs to exercisejudgment in applying the group's accounting policies. This note provides an overview ofthe areas that involved a higher degree of judgment or complexity and of items which aremore likely to be adjusted due to estimates and assumptions turning out to be differentfrom those originally assessed. Detailed information about each of these estimates andjudgments is included in relevant notes together with information about the basis ofcalculation for each affected line item in the financial statements.
Critical estimates and judgments
The areas involving critical estimates or judgments are: a) Estimation of current taxexpense and payable Refer accounting policies - 3.9 b) Estimated useful life ofproperty plant & equipment and intangible assets Refer accounting policies-3.1 c) Estimation of defined benefit obligation Refer accounting policies -3.8 d)Estimation of fair values of contingent liabilities - Refer accounting policies -3.12 e)Recognition of revenue - Refer accounting policies - 3.4 f) Recognition of deferred taxassets for carried forward tax losses Refer accounting policies -3.9 g) Impairmentof financial assets Refer accounting policies - 3.2 &3.5 Estimates andjudgments are continually evaluated. They are based on historical experience and otherfactors including expectations of future events that may have a financial impact on thegroup and that are believed to be reasonable under the circumstances.
Note: -3 : SIGNIFICANT ACCOUNTING POLICIES 3.1 Property plant and equipment:
Property plant and equipment are stated at original cost net of tax / duty creditavailed less accumulated depreciation and accumulated impairment losses if any. Costincludes purchase price and all other attributable cost of bringing the asset to workingcondition for intended use. Finance costs relating to borrowing funds attributable toacquisition of fixed assets are also included in the cost for the period till such assetis put to use.
When significant parts of property plant and equipment are required to be replaced atintervals th e Company derecognizes the replaced part and recognizes the new part withits own associated useful life and it is depreciated accordingly. Where components of anasset are significant in value in relation to the total value of the asset as a whole andthey have substantially different economic lives as compared to principal item of theasset they are recognized separately as independent items and are depreciated over theirestimated economic useful lives.
All other repair and maintenance costs are recognized in the statement of profit andloss as incurred unless they meet the recognition criteria for capitalization underProperty Plant and Equipment Tangible Fixed Assets: Depreciation on tangible assets isprovided on the Straight-Line Method (SLM) over the useful life of the assets asprescribed under Schedule II to the Companies Act 2013. In respect of the fixed assetspurchased during the year depreciation is provided on pro rata basis from the date onwhich such asset is ready to be put to use. On transition to Ind AS as on April 1 2016the Company has elected to measure its Property Plant and Equipment at cost as per IndAS. Intangible Assets: Intangible assets acquired separately are measured on initialrecognition at cost. Following initial recognition intangible assets are carried at costless any accumulated amortization and accumulated impairment losses (if any).
An item of intangible asset initially recognized is derecognized upon disposal or whenno future economic benefits are expected from its use or disposal. Any gain or lossarising on de-recognition of the asset [calculated as the difference between the netdisposal proceeds and the carrying amount of the asset] is included in the incomestatement when the asset is derecognized. Intangible fixed assets are amortized onstraight line basis over their estimated useful economic life.
Capital Work- in- progress
Capital work- in- progress represents directly attributable costs of construction to becapitalized. All other expenses including interest incurred during construction period arecapitalized as a part of the construction cost to the extent to which these expendituresare attributable to the construction as per Ind AS-23 "Borrowing Costs".Interest income earned on temporary investment of funds brought in for the project duringconstruction period are set off from the interest expense accounted for as expenditureduring the construction period.
Right of Use of asset
With effect from 1st April 2019 the company has adopted Ind AS 116 "Leases"with the modified retrospective approach. Accordingly the company has not re-stated itscomparative financial results. This has resulted in reorganization of right-of-use assetand corresponding lease liability as a 1st April 2019. Depreciation / Amortization ofAsset had been made on the basis of balance no of years of right to use such asset.
3.2 Impairment of non-financial assets
The carrying amounts of assets are reviewed at each balance sheet date if there is anyindication of impairment based on internal/external factors. An impairment loss isrecognized wherever the carrying amount of an asset exceeds its value in use the Companymeasures it on the basis of discounted cash flows of next five years' projectionsestimated based on current prices. Assessment is also done at each Balance Sheet date asto whether there is any indication that an impairment loss recognized for an asset inprior accounting periods may no longer exist or may have decreased. After impairmentdepreciation is provided on the revised carrying amount of the asset over its remaininguseful life.
3.3 Foreign Currency Transactions
The Company's financial statements are presented in INR which is also the Company'sfunctional currency. Initial Recognition
Foreign currency transactions are recorded in the reporting currency by applying tothe foreign currency amount the exchange rate between the reporting currency and theforeign currency at the date of transaction.
Foreign currency monetary items are reported using the closing rate. Non-monetaryitems which are measured in terms of historical costs denominated in foreign currencyare reported using the exchange rate at the date of the transaction. Non-monetary itemswhich are measured at fair value or other similar valuation denominated in a foreigncurrency are translated using the exchange rate at the date when such value wasdetermined.
Exchange differences arising on the settlement of monetary items or on reportingCompany's monetary items at rates different from those at which they were initiallyrecorded during the year or reported in previous financial statements includingreceivables and payables which are likely to be settled in foreseeable future arerecognized as income or as expenses in the year in which they arise. All other exchangedifferences are recognized as income or as expenses in the period in which they arise.
Transactions covered under forward contracts are accounted for at the contracted rate.All export proceeds have been accounted for at a fixed rate of exchange at the time ofraising invoices. Foreign exchange fluctuations as a result of the export sales have beenadjusted in the statement of profit and loss account and export proceeds not realized atthe balance sheet date are restated at the rate prevailing as at the balance sheet date.
3.4 Revenue recognition
Revenue is recognized to the extent it is probable that the economic benefits will flowto the Company and the revenue can be reliably measured. Specifically (i) Sale of goodsis recognized on transfer of significant risk and rewards of ownership which is generallyon shipment and dispatch to customers.
(ii) Revenue/Loss from bargain settlement of goods is recognized at the time ofsettlement of transactions.
(iii) Export benefits/Value added tax benefits are recognized as Income when the rightto receive credit as per the terms of the scheme is established and there is nosignificant uncertainty regarding the claim.
(iv) For all debt instruments measured either at amortized cost or at fair valuethrough other comprehensive income [OCI] interest income is recorded using the effectiveinterest rate [EIR]. EIR is the rate that exactly discounts the estimated future cashpayments or receipts over the expected life of the financial instrument or a shorterperiod where appropriate to the gross carrying amount of the financial asset or to theamortized cost of a financial liability. When calculating the effective interest rate theCompany estimates the expected cash flows by considering all the contractual terms of thefinancial instrument [for example prepayment extension call and similar options] butdoes not consider the expected credit losses.
(v) Interest income is recognized on time proportion basis taking into account theamount outstanding an d rate applicable.
(vi) Share of profit and loss from partnership firm is recognized when company'sright/obligation to receive/pay is established.
(vii) Dividend income from investments is recognized when the Company's right toreceive payment is established which is generally when shareholders approve the dividend.
3.5 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of oneentity and a financial liability or equity instrument of another entity.
A. Financial Assets a. Initial recognition and measurement:
All financial assets are recognized initially at fair value plus in the case offinancial assets not recorded at fair value through profit or loss transaction costs thatare attributable to the acquisition of the fina ncial asset. Purchases or sales offinancial assets that require delivery of assets within a time frame established byregulation or convention in the market place [regular way trades] are recognized on thesettlement date trade date i.e. the date that the Company settle commits to purchase orsell the asset.
b. Subsequent measurement:
For purposes of subsequent measurement financial assets are classified in fourcategories:
i. Debt instruments at amortized cost:
A debt instrument' is measured at the amortized cost if both the followingconditions are met:
- The asset is held with an objective of collecting contractual cash flows
- Contractual terms of the asset give rise on specified dates to cash flows that are"solely payments of principal and interest" [SPPI] on the principal amountoutstanding.
After initial measurement such financial assets are subsequently measured at amortizedcost using the effective interest rate [EIR] method. Amortized cost is calculated bytaking into account any discount or premium on acquisition and fees or costs that are anintegral part of the EIR. The EIR amortization is included in finance income in theStatement of Profit and Loss. The losses arising from impairment are recognized in theprofit or loss. This category generally applies to trade and other receivables.
ii. Debt instruments at fair value through other comprehensive income [FVTOCI]:
A debt instrument' is classified as at the FVTOCI if both of the followingcriteria are met:
- The asset is held with objective of both - for collecting contractual cash flows andselling the financial a sset s
- The asset's contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well asat each reporting date at fair value. Fair value movements are recognized in the othercomprehensive income [OCI]. However the Company recognizes interest income impairmentlosses & reversals and foreign exchange gain or loss in the Statement of Profit andLoss. On derecognition of the asset cumulative gain or loss previously recognized in OCIis reclassified from the equity to Statement of Profit and Loss. Interest earned whilstholding FVTOCI debt instrument is reported as interest income using the EIR method.
iii. Debt instruments derivatives and equity instruments at fair value throughprofit or loss [FVTPL]:
FVTPL is a residual category for debt instruments. Any debt instrument which does notmeet the criteria for categorization as at amortized cost or as FVTOCI is classified asat FVTPL. Debt instruments included within the FVTPL category are measured at fair valuewith all changes recognized in the P&L
. iv. Equity instruments measured at fair value through other comprehensive income[FVTOCI]:
All equity investments in scope of Ind AS 109 are measured at fair value. Equityinstruments which are held for trading and contingent consideration recognized by anacquirer in a business combination to which Ind AS103 applies are classified as at FVTPL.For all other equity instruments the Company may make an irrevocable election to presentin other comprehensive income subsequent changes in the fair value. The Company has madesuch election on an instrument by instrument basis. The classification is made on initialrecognition and is irrevocable. If the Company decides to classify an equity instrument asat FVTOCI then all fair value changes on the instrument excluding dividends arerecognized in the OCI. There is no recycling of the amounts from OCI to Statement ofProfit and Loss even on sale of investment. However the Company may transfer thecumulative gain or loss within equity. Equity instruments included within t he FVTPLcategory are measured at fair value with all changes recognized in the Statement of Profitand Loss.
A financial asset is primarily derecognized when: i. The Company has transferred itsrights to receive cash flows from the asset or has assumed an obligation to pay thereceived cash flows in full without material delay to a third party under apass-through' arrangement~ and either [a] the Company has transferred substantiallyall the risks and rewards of t he asset or [b] the Company has neither transferred norretained substantially all the risks and rewards of the asset but has transferred controlof the asset. ii. The Company has transferred its rights to receive cash flows from anasset or has entered into a pas s-through arrangement it evaluates if and to what extentit has retained the risks and rewards of ownership.
B. Financial liabilities: a. Initial recognition and measurement:
Financial liabilities are classified at initial recognition as financial liabilitiesat fair value through profit or loss loans and borrowings payables or as derivativesdesignated as hedging instruments in an effective hedge as appropriate. All financialliabilities are recognized initially at fair value and in the case of loans andborrowings and payables net of directly attributable transaction costs.
b. Subsequent measurement:
The measurement of financial liabilities depends on their classification as describedbelow:
i. Financial liabilities at fair value through profit or loss:
Financial liabilities at fair value through profit or loss include financialliabilities held for tr ading and financial liabilities designated upon initialrecognition as at fair value through profit or loss. This category also includesderivative financial instruments entered into by the Company that are not designated ashedging instruments in hedge relationships as defined by Ind AS 109. Separated embeddedderivatives are also classified as held for trading unless they are designated aseffective hedging instruments. Gains or losses on liabilities held for trading arerecognized in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profitor loss are designated as such at the initial date of recognition and only if thecriteria in Ind AS 109 are satisfied for liabilities designated as FVTPL fair valuegains/ losses attributable to changes in own credit risk are recognized in OCI. Thesegains/ losses are not subsequently transferred to P&L. However the Company maytransfer the cumulative gain or loss within equity. All other changes in fair value ofsuch liability are recognized in the statement of profit or loss. The Company has notdesignated any financial liability as at fair value through profit and loss.
ii. Loans and borrowings:
After initial recognition interest-bearing loans and borrowings are subsequentlymeasured at amortized cost using the EIR method. Gains and losses are recognized in profitor loss when the liabilities are derecognized as well as through the EIR amortizationprocess. Amortized cost is calculated by taking into account any discount or premium onacquisition and fees or costs that are an integral part of the EIR. The EIR amortizationis included as finance costs in the statement of profit and loss. iii. Financialguarantee contracts:
Financial guarantee contracts issued by the Company are those contracts that require apayment to be made to reimburse the holder for a loss it incurs because the specifieddebtor fails to make a payment when due in accordance with the terms of a debt instrument.Financial guarantee contracts are recognized initially as a liability at fair valueadjusted for transaction costs that are directly attributable to the issuance of theguarantee. Subsequently the liability is measured at the higher of the amount of lo ssallowance determined as per impairment requirements of Ind AS 109 and the amountrecognized less cumulative amortization. c. Derecognition:
A financial liability is derecognized when the obligation under the liability isdischarged or cancelled or expires. When an existing financial liability is replaced byanother from the same lender on substan tially different terms or the terms of anexisting liability are substantially modified such an exchange or modification is treatedas the derecognition of the original liability and the recognition of a new liability. Thedifference in the respective carrying amounts is recognized in the statement of profit orloss.
C. Reclassification of financial assets:
The Company determines classification of financial assets and liabilities on initialrecognition. After initial recognition no reclassification is made for financial assetswhich are equity instruments and financial liabilities. For financial assets which aredebt instruments a reclassification is made only if there is a change in the businessmodel for managing those assets. Changes to the business model are expected to beinfrequent. If the Company reclassifies financial assets it applies the reclassificationprospectively from the reclassification date which is the first day of the immediatelynext reporting period following the change in business model. The Company does not restateany previously recognized gains losses [including impairment gains or losses] orinterest.
D. Offsetting of financial instruments:
Financial assets and financial liabilities are offset and the net amount is reported inthe balance sheet if there is a currently enforceable legal right to offset the recognizedamounts and there is an intention to settle on a net basis to realize the assets andsettle the liabilities simultaneously.
3.6 Fair Value Measurement
The Company measures financial instruments at fair value at each balance sheet date.Fair value is the price that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants at the measurement date.The fair value measurement is based on the presumption that the transaction to sell theasset or transfer the liability takes place either: a. In the principal market for theasset or liability or
b. In the absence of a principal market in the most advantageous market for the assetor liability
The principal or the most advantageous market must be accessible by the Company. TheCompany uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value maximizing the use of relevantobservable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in thefinancial statements are categorized within the fair value hierarchy described asfollows based on the lowest level input that is significant to the fair value measurementas a whole:
Level 1 Quoted [unadjusted] market prices in active markets for identical assetsor liabilities.
Level 2 Valuation techniques for which the lowest level input that issignificant to the fair valu e measurement is directly or indirectly observable.
Level 3 Valuation techniques for which the lowest level input that issignificant to the fair valu e measurement is unobservable.
Inventories are valued at the lower of cost or net realizable value except RawMaterial which is valued at the cost. The cost is determined by weighted average method.The net realizable value is the estimated selling price in the ordinary course of businessless the estimated costs of completion and estimated costs necessary to make the sale.
3.8 Retirement benefits
Retirement benefit costs for the year are determined on the following basis:
(i) Company provides for Retirement Benefits in the form of Gratuity. Such Benefits areprovided for as at Balance Sheet date based on the valuation made by independentactuaries. Company has taken Group Gratuity Policy of LIC of India and Premium paid isrecognized as expenses when it is incurred. Actuarial gains or loss in respect of Gratuityare charged to Profit & Loss Account and OCI based on the actuary valuation report.
(ii) Provident fund is accrued on monthly basis in accordance with the terms ofcontract with the employees and is deposited with the Statutory Provident Fund. TheCompany's contribution is charged to profit and loss account.
(iii) Company also provides for Leave Encashment as at Balance Sheet date based on thevaluation made by independent actuaries
Re-measurements comprising of actuarial gains and losses the effect of the assetceiling excludin g amounts included in net interest on the net defined benefit liabilityand the return on plan assets (excluding amounts included in net interest on the netdefined benefit liability) are recognized immediately in the balance sheet with acorresponding debit or credit to retained earnings through other comprehensive income inthe period in which they occur. Re-measurements are not classified to the statement ofprofit and loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefitliability or asset
3.9 Taxes on Income
Tax expense comprises current and deferred tax. Current income tax is measured at theamount expected to be paid to the tax authorities in accordance with the Income Tax Act1961 and tax laws prevailing in the respective tax jurisdictions where the Companyoperates. Current tax items are recognized in correlation to the underlying transactioneither in P&L OCI or directly in equity.
Deferred tax is provided using the liability method on temporary differences betweenthe tax bases o f assets and liabilities and their carrying amounts for financialreporting purposes at the reporting date.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferredtax assets are recognized for all deductible temporary differences the carry forward ofunused tax credits and any unused tax losses. Deferred tax assets are recognized on thebasis of reasonable certainty that the company will be having sufficient future taxableprofits and based on the same the DTA has been recognized in the books.
The carrying amount of deferred tax assets is reviewed at each reporting date andreduced to the extent that it is no longer probable that sufficient taxable profit will beavailable to allow all or part of the deferred tax asset to be utilized. Unrecognizeddeferred tax assets are re-assessed at each reporting date and are recognized to theextent that it has become probable that future taxable profits will allow the deferred taxasset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected toapply in the year when the asset is realized or the liability is settled based on taxrates [and tax laws] that have been enacted or substantively enacted at the reportingdate.
Deferred tax items are recognized in correlation to the underlying transaction eitherin OCI or directly in equity. Deferred tax assets and deferred tax liabilities are offsetif a legally enforceable right exists to set off current tax assets against current taxliabilities.
The Company has decided to continue with the existing tax structure until theutilization of accumul ated Minimum Alternate Tax (MAT) credit.
3.10 Borrowing costs
Borrowing cost includes interest amortization of ancillary costs incurred inconnection with the ar rangement of borrowings and exchange differences arising fromforeign currency borrowings to the extent they are regarded as an adjustment to theinterest cost.
Borrowing costs directly attributable to the acquisition construction or production ofan asset that necessarily takes a substantial period of time to get ready for its intendeduse or sale are capitalized as part of the cost of the respective asset. All otherborrowing costs are expensed in the period they occur.
Borrowing costs which are not specifically attributable to the acquisitionconstruction or production of a qualifying asset the amount of borrowing costs eligiblefor capitalization is determined by applying a weighte d average capitalization rate. Theweighted average rate is taken of the borrowing costs applicable to the outstandingborrowings of the company during the period other than borrowings made specifically forthe purpose of obtaining a qualifying asset. The amount of borrowing costs capitalizedcannot exceed the amount of borrowing costs incurred during that period.
3.11 Earnings per equity share
Basic earnings per share is calculated by dividing the net profit or loss fromcontinuing operation and total profit both attributable to equity shareholders of theCompany by the weighted average number of equity shares o utstanding during the period.
3.12 Provisions Contingent Liabilities and Contingent Assets:
Provision is recognized when the Company has a present obligation (legal orconstructive) as a result of past events and it is probable that the outflow of resourceswill be required to settle the obligation and in respect of which reliable estimates canbe made.
A disclosure for contingent liability is made when there is a possible obligation thatmay but probably will not require an outflow of resources. When there is a possibleobligation or a present obligation in respect of which the likelihood of outflow ofresources is remote no provision/ disclosure is made. The Company does not recognize acontingent liability but discloses its existence in the financial statements.
Contingent assets are not recognized in the financial statements. Provisions andcontingencies are reviewed at each balance sheet date and adjusted to reflect the correctmanagement estimates.
If the effect of the time value of money is material provisions are discounted using acurrent pre-tax rate that reflects using a current pre-tax rate that reflects whenappropriate the risks specific to the liability. Commitments include the amount ofpurchase order (net of advances) issued to parties for completion of assets. Provisionscontingent liabilities contingent assets and commitments are renewed at each balancesheet date.
3.13 Cash and Cash Equivalents
Cash and cash equivalent comprise cash on hand and demand deposits with banks which areshort-term highly liquid investments that are readily convertible into known amounts ofcash and which are subject to insignificant risk of changes in value.
3.14 Exceptional items
Certain occasions the size type or incidence of an item of income or expensepertaining to the ordinary activities of the Company is such that its disclosure improvesthe understanding of the performance of the Company such income or expense is classifiedas an exceptional item and accordingly disclosed in the notes accompanying to thefinancial statements.