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Gujarat Fluorochemicals Ltd.

BSE: 542812 Sector: Industrials
NSE: FLUOROCHEM ISIN Code: INE09N301011
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Mkt Cap.(Rs cr) 22,666
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OPEN 2101.65
CLOSE 2110.45
VOLUME 8067
52-Week high 2209.60
52-Week low 525.00
P/E
Mkt Cap.(Rs cr) 22,666
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Gujarat Fluorochemicals Ltd. (FLUOROCHEM) - Auditors Report

Company auditors report

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of GujaratFluorochemicals Limited ("the Company") earlier known as InoxFluorochemicals Limited which comprise the Standalone Balance Sheet as at 31 March 2020the Standalone Statement of Profit and Loss (including Other Comprehensive Income) theStandalone Statement of Changes in Equity and the Standalone Statement of Cash Flows forthe year then ended and notes to the standalone financial statements including a summaryof significant accounting policies and other explanatory information ("the standalonefinancial 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 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015("Ind AS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2020 the profit and total 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 Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements' section of our report. We are independent of the Company in accordance withthe Code of Ethics issued by the Institute of Chartered Accountants of India("ICAI") together with the ethical requirements that are relevant to our auditof the standalone financial statements under the provisions of the Act and the Rules madethere under and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the ICAI's Code of Ethics. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter

1. As described in the Note 2.2 of the standalone financial statements in preparationof these standalone financial statements the Company has considered the effect ofuncertainties due to COVID-19 pandemic on the operations of the Company. The actual impactof COVID-19 pandemic may be different from that estimated as on the date of approval ofthe Statement.

2. Commission of H 41746 lakhs to a non-executive director and payment of capitaladvance of H 70439.60 lakhs to a related party requires approval of the shareholders inthe forthcoming Annual General Meeting as per the requirements of SEBI (ListingObligations and Disclosure Requirements) Regulations.

Our report is not modified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.

Sr. No. Key Audit Matter Auditor's Response
1. Business combination To address this key audit matter our audit procedures included the following:
As described in Note 1 and 50 to the standalone financial statements the Chemical Business Undertaking of GFL Ltd. is demerged and vested with the Company w.e.f. 1st April 2019 as per the Scheme of Arrangement approved by NCLT and became effective on 16th July 2019. This has been identified as a key audit matter since it is a significant event requiring compliances of the terms of the Scheme accounting as per the relevant Ind AS and also complexities involved in the presentation in financial statements • Examination of the Scheme of Arrangement pursuant to which the demerger was carried out along with the regulatory approvals required for the Scheme of Arrangement to take effect;
• Evaluation of the appropriateness of the accounting treatment followed by the Company in this regard including the adjustments given in the reserves and surplus with reference to the Scheme Ind AS 103: Business Combinations and the requirements of the accounting principles generally accepted in India;
• Testing the adjustment given in the reserves and surplus for net assets transferred to the Company; and
• Examination the disclosures given in the standalone financial statements for adequacy and appropriateness including disclosure of comparative figures.
2. Evaluation of direct tax position To address this key audit matter our audit procedures included the following:
Pursuant to the aforesaid demerger the Company has recognized MAT credit entitlement of H 66720.12 lakhs pertaining to the demerged undertaking. Further the Company has also recognised incremental tax benefits of H 3712.97 lakhs for earlier periods in respect of the demerged Chemical Business Undertaking vested with the Company on receipt of the ITAT orders during the year and interest of H 11969.46 lakhs on the resulting income-tax refunds. This has been identified as a key audit matter due to magnitude of the amount involved significant judgement and estimation required by the management and critical tax position taken. • Review of the ITAT orders and the Scheme as approved by NCLT
• Discussion on the matter with the senior management and understanding of the tax position taken by the Company;
• Assessment of the management's judgement of the possible outcome of the tax position with reference to the judicial pronouncements available in this regard;
• Checking of the calculations made by the management in this regard for mathematical accuracy; and
• Assessment of the relevant disclosures made within the financial statements to ensure they appropriately reflect the facts and the position taken by the Company.

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

The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the Board'sReport including Annexures to Board's Report Management Discussion and AnalysisBusiness Responsibility Report Corporate Governance Report and Shareholder Informationbut does not include the standalone financial statements and our auditor's report thereon.

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 during the course of our audit or otherwise appears to be materially misstated.If based on the work we have performed we conclude that there is a material misstatementof this other information we are required to report that fact. We have nothing to reportin this regard.

Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income changes in equity and cash flows of the Company in accordancewith the Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds 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 presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

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

Auditor's Responsibilities for the Audit of 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 judgement 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 financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system with reference to financialstatements in place and the 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 thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's 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.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of section 143(11) of the Act we givein the Annexure I a statement on the matters specified in paragraphs 3 and 4 of the Orderto the extent applicable.

2. As required by Section 143(3) of the Act based on our audit 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 IndAS specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.

(e) On the basis of the written representations received from the directors as on 31March 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2020 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 II. Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls withreference to financial statements.

(g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act in our opinion and to thebest of our information and according to the explanations given to us the remunerationpaid by the Company to its directors during the year is in accordance with the provisionsof section 197 of the Act.

(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and 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 on its financialposition in its standalone financial statements;

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses on long-term contracts including derivativecontracts;

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

Other matters

Due to the COVID-19 related lockdown we were not able to attend the year end physicalverification of inventory. Consequently we have performed alternate procedures to auditthe existence of inventory as per the guidance provided in SA 501 "Audit Evidence -Specific Considerations for Selected Items" and have obtained sufficient appropriateaudit evidence to issue our opinion on the standalone financial statements. Our report onthe standalone financial statements is not modified in respect of this matters.

For Patankar & Associates Chartered Accountants Firm's Registration No. 107628W

S S Agrawal

Partner

Membership No. 049051

Place: Pune

Date: 30th July 2020

UDIN: 20049051AAAAAV1431

Annexure I

TO INDEPENDENT AUDITOR'S REPORT

to the members of Gujarat Fluorochemicals Limited (earlier known as InoxFluorochemicals Limited) on the standalone financial statements for the year ended 31March 2020 - referred to in paragraph 1 under the heading "Report on Other Legal andRegulatory Requirements" of our report of even date

In term of the Companies (Auditor's Report) Order 2016 ("the Order") on thebasis of information and explanation given to us and the books and records examined by usin the normal course of audit and such checks as we considered appropriate to the best ofour knowledge and belief we state as under:

1. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets. The fixed assets have been physicallyverified by the management at reasonable intervals and no material discrepancies have beennoticed on such verification.

Particulars of immovable properties where the title deeds are not in the name of theCompany are as under:

Particulars No. of cases Original cost Carrying amount Remarks
Freehold land 8 46.86 46.86 These immovable properties are transferred and vested with the
Building 7 31235.22 21001.73
Leasehold land 14 4963.53 4409.98 Company on demerger as per the Scheme of Arrangement as described in Note 1 and are in the process of being registered in the name of the Company.
Investment property (building) 3 1258.70 1010.73
Building 1 2580.18 2580.06 As per the purchase agreement the property will be registered in the name of the Company after payment of the final installment of the deferred purchase consideration.

2. The inventories were physically verified by the management at reasonable intervalsduring the year and no material discrepancies were noticed on physical verification ofinventories as compared to book records.

3. The Company has not granted any loan secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Companies Act 2013 and hence the provisions of clause 3(iii) of theOrder are not applicable to the Company.

4. The Company has complied with the provisions of section 185 and section 186 of theAct in respect of investments made or loans given or guarantee or security provided.

5. The Company has not accepted any deposits within the meaning of section 73 to 76 ofthe Companies Act 2013 and the Rules framed there under and hence the provisions ofclause 3(v) of the Order are not applicable to the Company.

6. We have broadly reviewed the books of account maintained by the Company pursuant tothe Rules made by the Central Government for maintenance of cost records under section148(1) of the Companies Act 2013 for activities of the Company to which the said Rulesare made applicable and are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained.

7. The Company is generally regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund employees' state insuranceincome-tax Goods & Service Tax duty of customs cess and other material statutorydues applicable to it. There are no undisputed amounts payable in respect of suchstatutory dues which were in arrears as at 31 March 2020 for a period of more than sixmonths from the date they become payable.

Particulars of dues of income tax service tax duty of customs duty of excise andvalue added tax which have not been deposited on account of disputes are as under:

Name of the Statute Nature of dues and the period to which the amount relates Amount (Rs. in Lakh) Forum where dispute is pending
Central Excise Act 1944 Cenvat Credit availed on various items including interest and penalty a) April 2007 to November 2007 363.34 Customs Excise and Service Tax Appellate Tribunal Ahmedabad
b) April 2011 to June 2017 2.53
c) April 2012 to December 2012 154.88
d) April 2013 to March 2017 375.54
e) June 2016 to June 2017 9.97
Cenvat Credit on inter unit transactions 845.98 Customs Excise and Service Tax Appellate Tribunal Ahmedabad
Cenvat Credit availed on various items including interest and penalty July 2015 to March 2017 3.52 Commissioner (Appeals-II) Central Excise Customs and Service tax Vadodara
Customs Act 1962 Differential duty on high seas import March 2012 to May 2013 973.57 Customs Excise and Service Tax Appellate Tribunal Ahmedabad
Gujarat Value Added Tax Act 2003 Proportionate ITC on Capital goods. - F.Y. 2011-2012 52.33 Gujarat Value Added Tax Tribunal Ahmedabad
Proportionate ITC on Capital goods F.Y. 2013-2014 21.36 Joint Commissioner of Commercial Tax (Appeal)
Income tax Act 1961 Disallowance u/s 14A and reductions in tax incentives claim - F.Y. 2015-2016 - A.Y. 2016-2017 66.85 (settled after the year end) Commissioner of Appeals - 1 Vadodara

All the above liabilities are vested with the Company on demerger of the ChemicalBusiness Undertaking as per the Scheme of Arrangement (See Note 1 and 50 of the Notes tothe Standalone Financial Statements.)

8. The Company has not defaulted in repayment of dues to banks or financialinstitutions and the Company did not have any borrowings from Government or by way ofdebentures.

9. The Company has applied the moneys raised by way of term loans for the purpose forwhich these loans were raised. The Company did not raise moneys by way of initial publicoffer or further public offer (including debt instruments).

10. No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the course of our audit.

11. The Company has complied with the provisions of section 197 of the Companies Act2013 regarding payment of managerial remuneration.

12. The Company is not a Nidhi Company and hence the provisions of clause 3(xii) of theOrder are not applicable to the Company.

13. All transactions with the related parties are in compliance with sections 177 and188 of Companies Act 2013 and the details have been disclosed in the standalone financialstatements etc. as required by the applicable accounting standards.

14. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review and hence theprovisions of clause 3(xiv) of the Order are not applicable to the Company.

15. The Company has not entered into any non-cash transactions with directors orpersons connected with them and hence the provisions of clause 3(xv) of the Order are notapplicable to the Company.

16. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934 and hence the provisions of clause 3(xvi) of the Order are notapplicable to the Company.

For Patankar & Associates Chartered Accountants Firm's Registration No. 107628W

S S Agrawal

Partner

Membership No. 049051

Place: Pune Date: 30th July 2020

ANNEXURE II

TO INDEPENDENT AUDITOR'S REPORT

TO THE MEMBERS OF GUJARAT FLUOROCHEMICALS LIMITED (EARLIER

known as Inox Fluorochemicals Limited) on the standalone financial statements for theyear ended 31 March 2020 - referred to in paragraph 2(f) under the heading ‘Report onOther Legal and Regulatory Requirements' of our report of even date Report on the InternalFinancial Controls with reference to financial statements under Clause (i) of Sub-section3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls with reference to financial statementsof Gujarat Fluorochemicals Limited earlier known as Inox Fluorochemicals Limited("the Company") as of 31 March 2020 in conjunction with our audit of thestandalone financial statements 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 controlsstated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India ("the ICAI"). These responsibilities include the design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under 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 deemed to beprescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of internal financial controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls with reference to financial statementswas established 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 with reference to financial statements and theiroperating effectiveness.

Our audit of internal financial controls with reference to financial statementsincluded obtaining an understanding of internal financial controls with reference tofinancial statements assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto 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 systemwith reference to financial statements.

Meaning of Internal Financial Controls with reference to Financial Statements

A company's internal financial control 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 includes 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 authorizations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized 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.

Opinion

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem with reference to financial statements and such internal financial controls withreference to financial statements were operating effectively as at 31 March 2020 based onthe internal controls over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Noteissued by the ICAI.

For Patankar & Associates

Chartered Accountants

Firm's Registration No. 107628W

S S Agrawal

Partner

Membership No. 049051

Place: Pune

Date: 30th July 2020

.