To the Members of Hester Biosciences Limited
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Hester BiosciencesLimited ("the Company") which comprise the Balance Sheet as at 31 March 2020and the Statement of Profit and Loss including the Statement of Other ComprehensiveIncome the Statement of Changes in Equity and the Cash Flow Statement for the year thenended and notes to the financial statements including a summary of the significantaccounting policies and other explanatory information (hereinafter referred to as"Standalone Financial Statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at 31 March 2020 and its profit including othercomprehensive income the changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements' section of ourreport. We are independent of the Company in accordance with the Code of Ethics'issued by the Institute of Chartered Accountants of India (ICAI) together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the Standalone Financial Statements.
Emphasis of Matter
We draw attention to Note No. 47 of the standalone financial statements as regards themanagement's evaluation of COVID-19 impact on the future performance of the Company aswell as of its subsidiaries and to assess the recoverability of certain assets theCompany has considered internal and external information in respect of the current andestimated future global including Indian economic indicators consequent to the globalhealth pandemic. The actual impact of the pandemic may be different from that consideredin assessing the recoverability of these assets.
Our opinion is not modified in respect of this matter.
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 for the financial yearended 31 March 2020. These matters were addressed in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters. In addition to the matter described inthe Emphasis of Matter' section we have determined the matters described below tobe the key audit matters to be communicated in our report. For each matter below ourdescription of how our audit addressed the matter is provided in that context. We havefulfilled the responsibilities described in the Auditor's responsibilities for the auditof the standalone financial statements section of our report including in relation tothese matters. Accordingly our audit included the performance of procedures designed torespond to our assessment of the risks of material misstatement of the standalonefinancial statements. The results of our audit procedures including the proceduresperformed to address the matters below provide the basis for our audit opinion on theaccompanying standalone financial statements.
|Sr. No. Key Audit Matter ||Auditor's Response |
|1 Impairment of Company's Investments in and loans to subsidiaries || |
|As at 31 March 2020 the carrying value of the Company's investments in equity shares and loans given to the subsidiaries amounted to Rs. 406705732 and Rs. 50863356. The Company accounts for above investments in subsidiaries at cost (subject to impairment assessment). Management regularly reviews whether there are any indicators of impairment of the investments by reference to Ind AS 36 - Impairment of Assets'. ||Our audit procedures in relation to evaluation of impairment testing of investments in and loans to subsidiaries included the following: |
| ||We obtained an understanding from the management assessed and tested the design and operating effectiveness of the Company's key controls over the impairment assessment of such investments. |
|This is a Key Audit Matter as the amount of investments and loans to subsidiaries is material to the separate financial statements of the Company and the determination of recoverable value for impairment assessment involves significant management judgement. ||We evaluated the Company's process regarding impairment assessment We evaluated the cash flow forecasts (with underlying economic growth rate) by comparing them to the approved budgets and our understanding of the internal and external factors. |
| ||We checked the mathematical accuracy of the impairment model and agreed relevant data back to the latest budgets actual past results and other supporting documents. |
| ||We compared the carrying values of the investments and loans to subsidiaries with their respective net assets values and earnings for the period. |
| ||We evaluated the disclosures made in the Standalone Financial Statements. |
|2 Existence of inventory of raw and packing materials work in progress finished goods (manufactured and traded) || |
|The Company has its inventory located at various locations. Due to the travel restrictions imposed because of COVID-19 in the month of March 2020 we were unable to verify the inventory located at various premises of the Company. We therefore performed alternate procedures to test existence of inventory as at year-end in accordance with the requirements of the auditing standards; and hence identified as a key audit matter. ||Inventory verification not performed by us at the year end we performed the following key audit procedures: Understood and evaluated the management's internal controls process to establish the existence of inventory such as (a) maintenance of stock records at all locations and (b) the process for identifying expired near-expiry items of inventory. |
| ||On a sample basis we inspected documentation subsequent to the year- end; determined production up to the year-end; tested purchase of inventory prior to the year end and tested movement of raw materials to work in progress and work in progress to finished goods up to the year end. |
| ||On a sample basis we independently performed quantity reconciliation from 1 April 2019 to 31 March 2020 for key items of raw material and finished goods. |
|3 Revenue Recognition || |
|The Company provides a right of return to its customers as a customary business practice. These arrangements result in deductions to gross amounts invoiced. The revenue is reduced taking into consideration the anticipated sales returns. Due to the Company's presence across different regions and the competitive business environment the estimation of anticipated sales returns involves significant estimates and considered to be complex and judgemental. ||Our audit procedures included following: Assessing the Company's accounting policies for sales returns by comparing with applicable accounting standards |
| ||Testing the design implementation and operating effectiveness of key controls over the development of assumption of expected sales returns based on experience and completeness recognition and measurement of accruals for sales returns |
|The estimation is dependent on various internal and external factors. These factors include for example the length of time when a sale is made and when the sales return takes place some of which are beyond the control of the Company. Accuracy of revenues may deviate because of change in judgements and estimates. Accordingly evaluating the assumption of expected returns based on experience. We considered the evaluation of accrual for sales returns as a key audit matter. ||Testing samples relating to sales returns recorded during the year and compared to the actual payments made or credit notes generated towards these items Checking completeness and accuracy of the data used by the Company for sales returns and also checking the selected sample of sales |
| ||Comparing the assumptions to current trends of sales returns. We have also examined the historical trend of the Company's estimates to assess the assumptions and judgements used by the Company in accrual of sales returns as well as current trend of sales return. |
|4 Carrying Value of Trade Receivables || |
|The collectability of the Company's trade receivables and the valuation of allowance for impairment of trade receivables require significant management judgment. ||Our audit procedures included following: We assessed a sample of trade receivables and advances. |
|Due to slack in the Poultry Industry Company has extended an additional credit period however this adverse impact is temporary in nature and Industry will recover in the short run as per the management estimate. As per the current assessment of the situation based on the Internal and external information available up to the date of approval of these financial results by the Board of Directors the Company believes that the Impact of Covid-19 on its business assets internal financial controls profitability and liquidity both present and future would be limited and there is no indication of any material impact on the carrying value. Management uses this information to determine whether a provision for impairment is required either for a specific transaction or for a customer's balance overall. Accordingly it has been determined as a key audit matter. ||We assessed the ageing of trade receivables and advances the customer's historical payment patterns and whether any post year-end payments have been received up to the date of completing our audit procedures. |
| ||We also discussed with the management regarding any disputes between the parties involved attempts by management to recover the amounts outstanding and on the credit status of significant counterparties wherever available. |
| ||In assessing the appropriateness of the overall provision for impairment we considered the management's application of policy for recognizing provisions. |
| ||We assessed the Company's provisioning policy and comparing the Company's provisioning against historical collection data. Considered the completeness and accuracy of the disclosures. |
Other Information - Information Other than the Standalone Financial Statements andAuditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Directors report but does notinclude the Standalone Financial Statements and our Auditor's Report thereon. Our opinionon the Standalone Financial Statements does not cover the other information and we do notexpress 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 such other informationis materially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.
Responsibility of Management for the Standalone Financial 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 accounting principles generally accepted in India including the IndianAccounting Standards (IND AS) specified under Section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended including the Companies(Indian Accounting Standards) Amendment Rules 2019.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting the frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe Standalone Financial Statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
In preparing the Standalone Financial Statements management 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 judgment andmaintain professional skepticism throughout the audit. We also: Identify and assess therisks of material misstatement of the Standalone Financial Statements whether due tofraud or error design and perform audit procedures responsive to those risks and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. Therisk of not detecting a material misstatement resulting from fraud is higher than for oneresulting from error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3) (i) ofthe Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on 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.
Evaluate the overall presentation structure and content of the Standalone FinancialStatements including the disclosures and whether the Standalone Financial Statementsrepresent 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.
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 A" a statement on the matters specified in paragraphs 3 and 4of the Order.
2. As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
(c) The Balance Sheet the Statement of Profit and Loss including other comprehensiveIncome the Statement of Changes in Equity and the Cash Flow
Statement dealt 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 prescribed under Section 133 of the Act read with the Companies(Indian Accounting Standards) Rules 2015 as amended including the Companies (IndianAccounting Standards) Amendment Rules 2019;
(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 with reference to these standalone financial statements and theoperating effectiveness of such controls refer to our separate report in "AnnexureB" to this report.
(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 according to the information and explanation given to us by the management theremuneration paid/provided during the Current Year by the Company to its directors is inaccordance with the provisions of Section 197 read with Schedule V of the Act. Theremuneration paid/provided to any director is not in excess of the limit laid down underSection 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. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements Refer Note 37 to the standalonefinancial statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there are any material foreseeable losses; and iii. There has been no delay intransferring amounts required to be transferred to the Investor Education and ProtectionFund by the Company.
referred to in Paragraph 1 on Report on Other Legal and Regulatory Requirements of OurReport of even date of Hester Biosciences Limited for the year ended 31 March 2020
(i) In respect of its Property Plant and Equipment:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.
(b) All property plant and equipment have not been physically verified by themanagement during the year but there is a regular programme of verification which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. No material discrepancies were noticed on verification carried out during the yearin accordance with the aforesaid plan.
(c) As per the information and explanations provided to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.
(ii) As explained to us the inventories were physically verified by the managementduring the year and no material discrepancies were noticed on such physical verification.Inventories lying with third parties have been confirmed by them as at 31 March 2020 andno material discrepancies were noticed in respect of such confirmations.
(iii) The Company has granted loan to a subsidiary company covered in the registermaintained under section 189 of the Companies Act 2013.
(a) In our opinion and according to the information and explanations given to us theterms and conditions of the grant of such loan is prima facie not prejudicial to theinterest of the Company.
(b) The schedule of repayment of principal and payment of interest has not beenstipulated and is at the discretion of the Company. Hence in the absence of stipulationof repayment terms there has been no default on the part of Party to whom the money hasbeen lent; and
(c) There is no amount of loan granted to company listed in the register maintainedunder section 189 of the Act which are overdue for more than ninety days.
(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act 2013in respect of loans to directors including entities in which they are interested and inrespect of grant of loans and advances making investments and providing guarantees andsecurities.
(v) According to the information and explanations given to us the Company has notaccepted any deposits within the meaning of sections 73 to 76 of the Act. Therefore theprovision of Clause (v) of paragraph 3 of the Order is not applicable to the Company.
(vi) We have broadly reviewed the cost records maintained by the Company pursuant tothe Companies (Cost Records and Audit) Rules 2014 prescribed by the Central Governmentunder Section 148(1) of the Companies Act 2013 related to the manufacturing of vaccinesand are of the opinion that prima facie the prescribed accounts and records have beenmaintained. We have however not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.
(vii) According to the information and explanation given to us in respect of statutorydues:
(a) The Company is generally regular in depositing with appropriate authoritiesundisputed statutory dues including Provident Fund Employees' State Insurance IncomeTax Sales Tax Service Tax Goods and Service Tax Value Added tax Custom Duty ExciseDuty Cess and other material statutory dues applicable to it.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of the aforesaid dues were outstanding at the 31 March 2020 for aperiod of more than six months from the date of becoming payable.
(c) According to the information and explanations given to us the dues outstanding ofIncome Tax on account of disputes are as follows:
|Name of the Statute ||Nature of Dues ||Years to which matter pertains ||Forum where dispute is pending ||Amount (Rs.) |
|Income Tax Act 1961 ||Income Tax ||A.Y. 2015-16 ||Commissioner of Income Tax (Appeals) ||1101580 |
(viii) In our opinion based on the audit procedures performed for the purpose ofreporting the true and fair view of the financial statements and according to theinformation and explanations given by the management the Company has not defaulted inrepayment of loans or borrowings to banks. The Company did not have any loans orborrowings from financial institutions Government and debenture holders.
(ix) In our opinion and according to the information and explanations given to us bythe management the Company has utilized monies raised by way of term loans for thepurposes for which they were raised. The Company has not raised any money by way ofinitial public offer / further public offer / debt instruments during the year.
(x) Based on the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the Company or no fraud on the Companyby the officers or employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.
(xii) The Company is not a Nidhi company and hence reporting under clause (xii) ofParagraph 3 the Order is not applicable to the Company.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with Section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in notes to thefinancial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given by the management and on anoverall examination of the Balance Sheet the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year under review and hence reporting requirements under clause (xiv) of Paragraph 3of the Order is not applicable to the Company.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in Section 192 of Companies Act 2013.
(xvi) According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
referred to in Paragraph 2(f) on Report on Other Legal and Regulatory Requirements ofOur Report of even date of Hester Biosciences Limited for the year ended 31 March 2020
Report on the Internal Financial Controls under Section 143(3)(i) of the Companies Act2013 ("the Act")
We have audited the internal financial controls over financial reporting of HesterBiosciences Limited (the Company') as of 31 March 2020 in conjunction with our auditof the standalone 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 control statedin the Guidance note on Audit of Internal Financial Controls over Financial Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India.These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to Company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation of reliablefinancial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these standalone financial statementsbased on our audit. We conducted our audit in accordance with the Guidance Note and theStandards on Auditing prescribed under Section 143(10) of the Companies Act 2013 to theextent applicable to an audit of internal financial controls and both issued by theInstitute of Chartered Accountants of India. The Guidance Note and those Standards requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial Controls over financialsreporting with reference to these standalone financial statements was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to these standalone financial statementsand their operative effectiveness. Our audit of internal financial controls over financialreporting included obtaining an understanding of internal financial controls overfinancial reporting with reference to these standalone financial statements assessing therisk that material weakness exists and testing and evaluating the design and operatingeffectiveness of internal controls based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the financial statements whether due fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis of our audit opinion on the internal financial control system overfinancial reporting with reference to these standalone financial statements.
Meaning of Internal Financial Controls Over Financial Reporting
A Company's internal financial controls over financial reporting with reference tothese standalone financial statements is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally acceptedaccounting principles. A Company's internal financial control over financial reportingwith reference to these standalone financial statements includes those policies andprocedures 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 havematerial 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 with reference to these standalone financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not to be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these standalone financial statements to future periods are subject to the risk thatthe internal financial controls over financial reporting with reference to thesestandalone financial statements may become inadequate because of changes in conditions orthat the degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanation givenby the management the Company has in all material respects an adequate internalfinancial control system over financial reporting with reference to these standalonefinancial statements and such internal financial controls over financial reporting withreference to these standalone financial statements were operating effectively as at 31March 2020 based on the internal controls over financials reporting criteria establishedby the Company considering the essential components of internal controls stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountants of India.