To the Members of Hikal Ltd
Report on the Audit of the Standalone Financial Statements Opinion
We have audited the accompanying standalone financial statements of Hikal Ltd("the Company") which comprise the Balance sheet as at 31 March 2021 theStatement of Profit and Loss including the statement of Other Comprehensive Income theCash Flow Statement and the Statement of Changes in Equity for the year then ended andnotes to the standalone financial statements including a summary of significantaccounting policies and 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 Companies Act 2013 as amended ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at 31 March 2021 its profit includingother comprehensive income its cash flows and the changes in equity for the year ended onthat date.
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 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.
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 2021. 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. For the matter below our description ofhow our audit addressed the matter is provided in that context.
We have determined the matter described below to be the key audit matter to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the standalone financial statements section ofour report including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the standalone financial statements. The results of our audit proceduresincluding the procedures performed to address the matter below provide the basis for ouraudit opinion on the accompanying standalone financial statements.
|Key audit matter ||How our audit addressed the key audit matter |
|Revenue recognition based on contracts with customers (as described in note 3.1 and 32 of the standalone financial statements) ||As part of our audit procedures we: |
|The Company recognizes revenue when control of the goods is transferred to the customers at an amount that reflects the net consideration which the Company is entitled to receive for those goods from customers. || Read the Company's accounting policy for revenue recognition and assessed its compliance with 115 'Revenue from contracts with customers'; |
|Revenue from sale of products is recognised based on terms and conditions which vary amongst different customers. There is a risk of revenue being overstated on account of variation in the timing of transfer of control and due to the pressure management may feel to achieve performance targets at the reporting period-end. || Assessed the design and tested the operating effectiveness of internal financial controls related to sale of goods; |
|The recognition and measurement of such revenue is also based on the terms of sales arrangement/ contracts which involves management judgement and estimation in respect of price adjustments that create complexities for determining sales revenues. || Performed sample tests of individual sales transactions and price adjustments and traced to sales invoices sales orders shipping documents and debit / credit notes; |
|Considering the above factors and the risk associated with recognition of such revenue we have determined the same to be a key audit matter. || Selected sample of sales transactions made pre and post year- end agreed the period of revenue recognition to underlying documents such as sales invoices sales orders and shipping documents; |
| || Read and assessed the relevant disclosures made within the standalone financial statements |
The Company's Board of Directors is responsible for the Other Information. OtherInformation comprises the information included in the annual report but does not includethe 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 such Other Informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this OtherInformation we are required to report that fact. We have nothing to report in thisregard.
Responsibilities 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 cash flows and changes in equity 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. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of 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 the 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 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.
The Board of Directors is 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 the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe 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 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 statementsfor the financial year ended 31 March 2021 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine
that a matter should not be communicated in our report because the adverse consequencesof doing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.
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 sub-section (11) of section 143 ofthe Act we give in the "Annexure 1 " a statement on the matters specified inparagraphs 3 and 4 of 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 the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt 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 Companies (IndianAccounting Standards) Rules 2015 as amended;
(e) On the basis of the written representations received from the directors taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2021 from being appointed as a director in terms of section 164 (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 "Annexure2" to this report;
(g) In our opinion the managerial remuneration for the year ended 31 March 2021 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to 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 note 46 to the standalone financial statements;
(ii) The Company did not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses;
(iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
Annexure 1 referred to in paragraph 1 under the heading "Report on Other Legal andRegulatory Requirements" of our report of even date on the standalone financialstatements of Hikal Ltd
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed asset
(b) All fixed assets have not been physically verified by the management during theyear but there is a regular programme of verification which in our opinion isreasonable having regard to the size of the Company and the nature of its assets. Nodiscrepancies were noticed on such verification
(c) According to the information and explanations given by the management and auditprocedures performed by us the title deeds of immovable properties included in propertyplant and equipment and right to use assets are held in the name of the Company
(ii) The management conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on such physicalverification
(iii) According to the information and explanations given to us and audit proceduresperformed by us the Company has not granted any loans secured or unsecured to companiesfirms Limited Liability Partnerships or other parties covered in the register maintainedunder section 189 of the Act. Accordingly the provisions of clause 3(iii) (b) and (c) ofthe Order are not applicable to the Company and hence not commented upon
(iv) In our opinion and according to the information and explanation given to us theCompany has not granted any loans or provided any guarantees or security to the partiescovered under Section 185 of the Act. The Company has complied with the provisions ofSection 186 of the Act in respect of the investments made
(v) The Company has not accepted any deposits within the meaning of sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable to the Companyand hence not commented upon
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records undersection 148(1) of the Act related to manufacture of products of the Company and are ofthe opinion that prima facie the specified accounts and records have been made andmaintained. We have not however made a detailed examination of the same
(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax duty of
custom goods and services tax and other statutory dues have generally been regularlydeposited with the appropriate authorities though there has been a slight delay in fewcases
(b) According to the information and explanations given to us and audit proceduresperformed by us no undisputed amounts payable in respect of provident fund employees'state insurance income-tax duty of custom goods and services tax and other statutorydues were outstanding at the year-end for a period of more than six months from the datethey became payable
(c) According to the records of the Company the dues of income-tax sales-tax servicetax duty of custom duty of excise value added tax and cess not deposited on account ofany dispute are as follows:
|Name of the statute ||Nature of the dues ||Amount Unpaid* (Rs. in Million) ||Period to which the amount relates ||Forum where dispute is pending |
|The Income Tax Act 1961 ||Income Tax ||108.48 ||FY 2006-07 and FY 2009-10 ||Income Tax Appellate Tribunal |
|The Income Tax Act 1961 ||Income Tax ||436.57 ||FY 2013-14 FY 2016-17 and FY 2017-18 ||Commissioner of Income Tax (Appeals) |
|The Central Excise Act 1944 ||Excise Duty ||34.13 ||July 2007 to December 2011 ||Customs Excise and Service Tax Appellate Tribunal Bangalore |
* Net of amount paid under protest
(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowings to financialinstitutions or banks during the year. The Company did not have any outstanding loans orborrowing from government or dues to debenture holders during the year
(ix) In our opinion and according to the information and explanations given by themanagement and audit procedures performed by us the Company has not raised any money byway of initial public offer / further public offer / debt instruments. Monies raised byway of term loans were utilized for the purposes for which they were raised
(x) Based upon 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 its officers and employees has been noticed or reported during the year
(xi) According to the information and explanations given by the management and theaudit procedures performed by us managerial remuneration has been paid / provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Act
(xii) In our opinion the Company is not a nidhi Company. Accordingly the provisionsof clause 3(xii) of the Order are not applicable to the Company and hence not commentedupon
(xiii) According to the information and explanations given by the management and auditprocedures performed by us transactions with the related parties are in compliance withsections 177 and 188 of the Act where applicable and the details have been disclosed inthe notes to the financial statements as required by the applicable accounting standards
(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder audit. Accordingly the provisions of clause 3(xiv) are not applicable to theCompany and hence not commented upon
(xv) According to the information and explanations given by the management and auditprocedures performed by us the Company has not entered into any non-cash transactionswith directors or persons connected with them as referred to in section 192 of the Act
(xvi) According to the information and explanations given to us and audit proceduresperformed by us the provisions of section 45-IA of the Reserve Bank of India Act 1934are not applicable to the Company.
Annexure 2 to the Independent Auditor's Report of even date on the standalone financialstatements of Hikal Ltd
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls of Hikal Ltd ("the Company")as of 31 March 2021 in conjunction with our audit of the standalone financial statementsof 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 criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls issued by the Institute of Chartered Accountants ofIndia ("ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence to theCompany'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 Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to these standalone financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note on Audit of Internal FinancialControls (the "Guidance Note") and the Standards on Auditing as specified undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols both issued by ICAI. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls with reference to thesestandalone financial statements was established and maintained and if such controlsoperated 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 operating effectiveness. Our audit of internal financial controls with referenceto standalone financial statements included obtaining an understanding of internalfinancial controls with reference to these standalone financial statements assessing therisk that a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control 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 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 withreference to these standalone financial statements.
Meaning of Internal Financial Controls with Reference to these Standalone FinancialStatements
A Company's internal financial control with reference to these standalone financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A Company's internalfinancial control with reference to these standalone financial statements includes thosepolicies and procedures that (1) pertain to the maintenance of records that in reasonabledetail accurately and fairly reflect the transactions and dispositions of the assets ofthe Company; (2) provide reasonable assurance that transactions are recorded as necessaryto permit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the Company are being madeonly in accordance with authorisations of management and directors of the Company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the Company's assets that could have a material effecton the financial statements.
Inherent Limitations of Internal Financial Controls with Reference to these StandaloneFinancial Statements
Because of the inherent limitations of internal financial controls with reference tothese standalone financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to these standalone financial statements to future periods aresubject to the risk that the internal financial control with reference to these standalonefinancial statements may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to these standalone financial statements and such internalfinancial controls with reference to these standalone financial statements were operatingeffectively as at 31 March 2021 based on the internal control criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote issued by the ICAI.
| ||For S R B C & CO LLP |
| ||Chartered Accountants |
| ||ICAI Firm Registration Number: 324982E/E300003 |
| ||per Vinayak Pujare |
| ||Partner |
|Place of Signature: Mumbai ||Membership Number: 101143 |
|Date: 06 May 2021 ||UDIN: 21101143AAAABD7304 |