To Members of Hatsun Agro Product Limited Report on the Audit of the FinancialStatements
We have audited the accompanying financial statements of Hatsun Agro Product Limited("the Company") which comprise the Balance Sheet as at 31 March 2020 and theStatement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofsignificant accounting policies and other explanatory information. In our opinion and tothe best of our information and according to the explanations given to us the aforesaidfinancial statements give the information required by the Companies Act 2013 ("theAct") in the manner so required and give a true and fair view in conformity with theIndian Accounting Standards prescribed under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended ("Ind AS") andother accounting principles generally accepted in India of the state of Affairs of theCompany as at 31 March 2020 and its profit total comprehensive income its cash fiowsand the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the financial statements in accordance with the Standards onAuditing specified under section 143(10) of the Act (SAs). Our responsibilities underthose Standards are further described in the Auditor's Responsibility 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 (ICAI) together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Act and the Rules made thereunder and wehave fulfilled our other ethical responsibilities in accordance with these requirementsand the ICAI's Code of Ethics. We believe that the audit evidence obtained by us issuficient and appropriate to provide a basis for our audit opinion on the financialstatements.
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. ese 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. Wehave determined the matter described below to be the key audit matter to be communicatedin our report.
|Sr. No. Key Audit Matter ||Auditor's Response |
|1. Impairment assessment of a project under Capital Work in Progress due to delay in commissioning: ||We have performed the following procedures: |
|Company had set up a green field project which was planned to be commissioned during the year 2018-19. However the project was put on hold due to a dispute over the legality of the ownership of a small portion of land passing through the project site. Due to delays in commencement of the project the Company relocated certain movable assets purchased for this project to another similar project and considered an alternate business plan for this project. || Evaluated the design and implementation and tested the operating effectiveness of the controls in respect of impairment assessment of capital work-in-progress by the management which inter-alia includes test of reasonableness of the input data considered and assumptions used in determining the present value of future cash fiows. |
|carrying value of land and capital work in progress as at March 31 2020 aggregates Rs. 4175 Lakhs as included in Note 3(ii) of the financial statements. || Obtained an understanding of the status of the project and of the legal dispute through discussions with the project manager. Also obtained and evaluated the outcome of the legal matter by obtaining a direct legal representation from the Company's external legal counsel. |
|Company is legally contesting the claims and has obtained legal opinion to support the merits of the case and has during the year also obtained regulatory approvals to commence the operations at the site. delay in commissioning the project and the consequent amendment in the business plan were considered to represent impairment indicators. || Verified if the cash fiow projections considered for the assessment of impairment were as per cash fiow projections as reviewed and approved by the Board of Directors of the Company. |
|process of determining the recoverable amount of such project under progress by the management involves significant judgement and estimation. || Evaluated and tested the appropriateness of key assumptions considered by the Management including discount rate growth rate performed sensitivity analysis of the key assumptions etc. duly considering the impact of Covid 19 pandemic and compared the assumptions with publicly available data. |
|Considering the legal issues delays involved and significant management judgement in the assessment of impairment this matter has been identified as a key audit matter for the year. || |
Information Other than the Financial Statements and Auditor's Report ereon
Company's Board of Directors is responsible for the other information. otherinformation comprises the Board's Report Corporate Governance Report ManagementDiscussion and Analysis and Business Responsibility Report but does not include thefinancial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information andwe do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility isto read the other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Management's Responsibility for the Financial Statements
e Company's Board of Directors is responsible for the matters stated in section 134(5)of the Act with respect to the preparation of these financial statements that give a trueand fair view of the financial position financial performance including othercomprehensive income cash fiows and changes in equity of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India. is responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statement that givea true and fair view and are free from material misstatement whether due to fraud orerror
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
ose Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibility 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 infiuence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is suficient and appropriate to provide abasis for our opinion. risk of not detecting a material misstatement resulting from fraudis higher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial control 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 in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by the 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 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.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be infiuenced.
We consider quantitative materiality and qualitative factors in (i) planning the scopeof our audit work and in evaluating the results of our work; and (ii) to evaluate theeffect of any identified misstatements in the financial statements. We communicate withthose charged with governance regarding among other matters the planned scope and timingof the audit and significant audit findings including any significant deficiencies ininternal 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 key 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
1. As required by Section 143(3) of the Act based on our audit 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) Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Cash Flow Statement and Statement of Changes in Equity dealt with by thisReport are in agreement with the relevant books of account.
d) In our opinion the aforesaid financial statements comply with the Ind AS specifiedunder Section 133 of the Act.
e) On the basis of the written representations received from the directors as on 31March 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 over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
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 as amended In our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of 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 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. Company has disclosed the impact of pending litigations on its financial position inits financial statements.
ii. Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.
iii. ere has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1(f) under Report on Other Legal and RegulatoryRequirements' section of our report of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of HatsunAgro Product Limited ("the Company") as of March 31 2020 in conjunctionwith our audit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
e 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". ese responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and eficient conduct of itsbusiness including adherence to respective company's policies the safeguarding of itsassets the prevention and detection of frauds and errors the accuracy and completenessof the accounting records and the timely preparation of reliable financial informationas required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting of the Company based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India and the Standards on Auditing prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controls.ose Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
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. proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial 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 of records that in reasonable detail accurately andfairly reffect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls 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 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 over financial reporting and such internal financial controls over financialreporting were operating effectively as at 31 March 2020 based on "the criteria forinternal financial control over financial reporting established by the respective Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial
Controls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia".
ANNEXURE "B" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements' section of our report of even date)
(i) (a) Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.
(b) Company has a program of verification of property plant and equipment to cover allthe items in a phased manner over a period of (three years once) which in our opinion isreasonable having regard to the size of the Company and the nature of its assets. Pursuantto the program certain property plant and equipment were physically verified by theManagement during the year. According to the information and explanations given to us nomaterial discrepancies were noticed on such verification.
(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deed/transfer deed/conveyancedeed provided to us we report that the title deeds comprising all the immovableproperties of land and buildings which are freehold are held in the name of the Companyas at the balance sheet date. Immovable properties of land and buildings whose title deedshave been pledged as security for borrowings are held in the name of the Company based onthe confirmations directly received by us from the lenders. In respect of immovableproperties of buildings that have been taken on lease and disclosed as Right of Use assetsin the financial statements the lease agreements are in the name of the Company.
(ii) As explained to us the inventories were physically verified during the year bythe Management at reasonable intervals and no material discrepancies were noticed onphysical verification.
(iii) Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Companies Act 2013.
(iv) Company has not granted any loans made investments or provided guarantees andhence reporting under clause (iv) of the CARO 2016 is not applicable.
(v) According to the information and explanations given to us the Company has notaccepted any deposit during the year. In respect of unclaimed deposits the Company hascomplied with the provisions of Sections 73 to 76 or any other relevant provisions of theCompanies Act 2013.
(vi) maintenance of cost records has been specified by the Central Government undersection 148(1) of the Companies Act 2013. We have broadly reviewed the cost recordsmaintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014as amended prescribed by the Central Government under sub-section (1) of Section 148 ofthe Companies Act 2013 related to manufacture of milk powder and are of the opinionthat prima facie the prescribed cost records have been made and maintained We havehowever not made a detailed examination of the cost records with a view to determinewhether they are accurate or complete.
(vii) According to the information and explanations given to us in respect ofstatutory dues:
(a) Company has been regular in depositing undisputed statutory dues includingProvident Fund Employees' State Insurance Income-tax Goods and Services Tax Cess andother material statutory dues applicable to it to the appropriate authorities.
(b) ere were no undisputed amounts payable in respect of Provident Fund Employees'State Insurance Income-tax Goods and Services Tax Cess and other material statutorydues in arrears as at 31 March 2020 for a period of more than six months from the datethey became payable.
(c) ere are no dues of Income-tax and Goods and Services Tax as on 31 March 2020 onaccount of disputes.
(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in the repayment of loans or borrowings to financialinstitutions banks and government. Company has not issued any debentures.
(ix) In our opinion and according to the information and explanations given to usmoney raised by way of further public offier (Rights Issue) and the term loans have beenapplied by the Company during the year for the purposes for which they were raised otherthan temporary deployment pending application of proceeds.
(x) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no material fraud on the Company by its officersor employees has been noticed or reported during the year.
(xi) In our opinion and according to the information and explanations given to us theCompany has paid/provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.
(xii) Company is not a Nidhi Company and hence reporting under clause (xii) of the CARO2016 Order is not applicable.
(xiii) In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the financial statements etc. as required by theapplicable accounting standards.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause (xiv) of CARO 2016 is not applicable to the Company.
(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or persons connected with them and hence provisions of section 192 of theCompanies Act 2013 are not applicable.
(xvi) Company is not required to be registered under section 45-IA of the Reserve Bankof India Act 1934.