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Himadri Speciality Chemical Ltd.

BSE: 500184 Sector: Industrials
NSE: HSCL ISIN Code: INE019C01026
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NSE 00:00 | 25 Oct 51.20 -4.30
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OPEN 55.60
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VOLUME 2172284
52-Week high 62.40
52-Week low 37.55
P/E 29.80
Mkt Cap.(Rs cr) 2,147
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 55.60
CLOSE 55.50
VOLUME 2172284
52-Week high 62.40
52-Week low 37.55
P/E 29.80
Mkt Cap.(Rs cr) 2,147
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Himadri Speciality Chemical Ltd. (HSCL) - Auditors Report

Company auditors report

To the Members of Himadri Speciality Chemical Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the standalone financial statements of Himadri Speciality ChemicalLimited ("the Company") which comprise the standalone balance sheet as at 31March 2020 and the standalone statement of profit and loss (including other comprehensiveincome) standalone statement of changes in equity and standalone statement of cash flowsfor the year then ended and notes to the standalone financial statements including asummary of the significant accounting policies and other explanatory information(hereinafter referred to as "the 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 ("Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2020 and profit and other 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 SAs 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 with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion on the Standalone financial statements.

Emphasis of Matter

We draw attention to note 50 of the standalone financial statements regarding theapproval of Scheme of Amalgamation between the Company and its wholly owned subsidiarycompany Equal Commodeal Private Limited by the National Company Law Tribunal("NCLT") vide NCLT's order dated 14 October 2019 with appointed date of 1April 2018. A certified copy of the order sanctioning the Scheme has been filed by theCompany with the Registrar of the Companies West Bengal on 11 November 2019.Accordingly the audited standalone financial statements for the year ended 31 March 2019have been restated by the Company after recognising the effect of the merger from theappointed date as stated in the aforesaid note.

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 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.

Description of Key Audit Matter

Assessment of impairment of investments and provision of loans and advances given tosubsidiary See note 7 and 11 to the standalone financial statements

The key audit matter How the matter was addressed in our audit
The Company has made investments in equity shares and given loans and advances ("loans") to a wholly owned subsidiary ("WoS") who in turn has invested in equity shares and given loans to a step-down subsidiary ("the subsidiary"). In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
The subsidiary has incurred losses during the year ended 31 March 2020 and its net worth stands fully eroded as on that date which indicates potential impairment of investments and loans. - Tested the design and operating effectiveness of controls as established by the Company in determination of appropriateness of the carrying value of investments and loans.
Determining whether there is objective evidence of impairment which includes a significant shortfall in the investee's actual business performance compared with budgets and significant changes in the technological market economic or legal environment that have an adverse effect on the fair value of the investment for investments which do not have a quoted prices in an active market involves the exercise of significant management judgement. - Discussed with the Company whether there was any objective evidence of impairment of investment and loans and challenging management's assertions and conclusions with reference to the guidance in the prevailing accounting standards and by (i) obtaining the latest available budgets and comparing the actual performance of the subsidiary with management expectations (ii) obtaining and reviewing the latest financial statements of the subsidiary and (iii) comparing the carrying amount of the investments and loans with the audited net worth of the subsidiary companies which have been audited by the respective component auditor.
We identified assessing potential impairment of investments in subsidiary and loans given to subsidiary as a key audit matter because of the significance of such investments and loans to the financial statements and because of the degree of judgement exercised by management in determining whether there was objective evidence of impairment of investments and provision of loans. - Assessed the appropriateness of the valuation methodology used by the Company and tested the mathematical accuracy of the impairment models.
- Evaluated the Company's process regarding impairment assessment by involving our valuation experts to assist in assessing the appropriateness of the investment's impairment model including the independent assessment of the underlying assumptions relating to discount rate economic growth rate terminal values etc.
- Performed sensitivity analysis around the key assumptions in particular discount rates and long-term growth rates.
- Assessed the appropriateness of disclosure made in the standalone financial statements of the Company.

Litigation and regulatory proceedings

See note 8 and 16 to the standalone financial statements

The key audit matter How the matter was addressed in our audit
As at 31 March 2020 the Company has certain amount receivable from a customer (refer note 8) and given certain advances to a supplier (refer note 16) which are currently under arbitration proceedings from earlier years. In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
The Company applies significant judgement in estimating the likelihood of the future outcome in each case when considering whether and how much to provide or in determining the required disclosure for the potential exposure of each matter. This is due to the magnitude of the legal matters involved along with the fact that legal proceedings may span over an extended period and may involve protracted negotiation or litigation. - Understood and evaluated the design and tested the operating effectiveness of controls around the assessment of this matter.
These estimates could change substantially over time as new facts emerge and legal cases progress. - Discussed the status and likelihood of the outcome of the litigation with the external legal counsel engaged by the Company.
The Company has carried out independent assessment of the above matters and also obtained independent legal opinion to support their assessment around the outcome - Evaluated the independence and competency of legal expert engaged by the Company.
of these litigations that has led to their conclusion that no provision is required to be recognised in the books of account against the same. - Read the independent legal opinion obtained by the Company from external legal counsel.
We considered this to be a matter of significance to our audit given the inherent complexity of the matters magnitude of potential exposures and the significant impact that the outcome of these litigations is likely to have on the standalone financial statements for the year ended 31 March 2020. - Obtained and tested evidence to support the Company's assessment on recoverability of the amount receivable from a customer and advances given to suppliers.
- Assessed the appropriateness of disclosure made in the standalone financial statements of the Company.

Recoverability of MAT credit entitlement (a component of deferred tax assets) See note33 to the standalone financial statements

The key audit matter How the matter was addressed in our audit
The Company has recognised Minimum Alternate Tax ('MAT') credit entitlement (a component of deferred tax assets) as at 31 March 2020. The utilisation of this asset will be through offsetting it when the Company pays taxes under the normal provision of Income-tax Act 1961. In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
Therefore the recoverability of MAT credit entitlement is dependent upon generation of sufficient future taxable profits within the stipulated period prescribed under the Income-tax Act 1961. - Evaluated the accounting policy of MAT credit entitlement in terms of relevant accounting standard.
The Company recognises MAT credit only when and to the extent there is convincing evidence that the Company will pay normal income tax during the period for which the MAT credit can be carried forward for setoff against the normal tax liability. This is based on profit earned during the current year and future profitability projections based on approved business plans. - Tested the design implementation and operating effectiveness of key controls regarding recoverability of MAT credit and budgeting procedures upon which the approved business plans are based.
Significant estimation is involved in projecting future taxable profits and other assumptions affected by expected future market or economic conditions. - Assessed the profit forecast prepared by the Company by comparing it with the historical trends current year performance and approved future business plans. Our assessment was based on our knowledge of the business.
Due to significant level of judgement as stated aforesaid we have identified recoverability of MAT credit entitlement as a key audit matter. - Evaluated the Company's estimate regarding the period by which the MAT credit entitlement would be utilised. We compared the Company's assessment to business plans and projections of future taxable profits with the prescribed credit utilisation period under the Income- tax Act 1961.
- Assessed the adequacy of related disclosures made in the standalone financial statements of the Company.

Other Information

The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditors' reportthereon.

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 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.

Management's and Board of Directors' Responsibility for the Standalone FinancialStatements

The Company's Management and Board of Directors are responsible for the matters statedin Section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit/ loss and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under Section 133 of the Act. 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 designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring accuracy and completeness of the accounting records relevant tothe preparation and presentation of the standalone financial statements that give a trueand fair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements the Management and Board of Directorsare responsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the Board of Directors either intends to liquidate the Companyor to cease operations or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company's financialreporting process.

Auditors' 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 auditors' 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 in the standalone financial statementsmade by the Management and Board of Directors.

• Conclude on the appropriateness of the Management and Board of Directors use ofthe going concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditors' report tothe related disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue 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 alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships 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 auditors' 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 (Auditors' Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.

2. (A) 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 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 Ind ASspecified under 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; and

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 B".

(B) With respect to the other matters to be included in the Auditors' 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 as at 31 March 2020 onits financial position in its standalone financial statements - Refer

Note 8(c) 16(b) 24 and 35(a) to the standalone financial statements;

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts - Refer Note 21 to the standalone financial statements;

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company; and

iv. The disclosures in the standalone financial statements regarding holdings as wellas dealings in specified bank notes during the period from 8 November 2016 to 30 December2016 have not been made in these standalone financial statements since they do not pertainto the financial year ended 31 March 2020.

(C) With respect to the matter to be included in the Auditors' Report under Section197(16): In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) of the Act whichare required to be commented upon by us.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W/W-100022
Sd/-
Jayanta Mukhopadhyay
Partner
Place: Kolkata Membership No. 055757
Date: 21 July 2020 UDIN: 20055757AAAACJ4289

Annexure A

To the Independent Auditors' Report on the standalone financial statements of HimadriSpeciality Chemical Limited for the year ended 31 March 2020

(Referred to in paragraph (1) under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date)

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The Company has a regular programme of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner over a period of three years. Inour opinion this periodicity of physical verification is reasonable having regard to thesize of the Company and the nature of its assets. In accordance with this programmecertain items of fixed assets have been physically verified by the management during theyear and no material discrepancies were noticed on such verification.

(c) According to information and explanations given 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 except for leasehold lands where we have verified thelease agreements duly registered with the appropriate authorities as disclosed in Note 4Ato the standalone financial statements and title deeds of freehold lands amounting toRs.518.86 lakhs which were transferred to the Company pursuant to the Scheme ofAmalgamation as disclosed in Note 4A and 50 to the Standalone Financial Statements. Asexplained to us steps are being taken to complete the transfer of the name in the titledeeds in the name of the Company.

(ii) The inventory except stock lying with third parties and goods-in-transit havebeen physically verified by the management of the Company at reasonable intervals duringthe year. In our opinion the frequency of such verification is reasonable. For stocklying with third parties as at the year end written confirmations have been obtained andin respect of goods-in- transit subsequent receipts of goods have been verified. Thediscrepancies noticed on verification between the physical stocks and the book recordswere not material.

(iii) According to the information and explanations given to us and based on ourexamination of the records the Company has not granted any loans secured or unsecured tocompanies firms limited liability partnerships or other parties covered in the registermaintained under Section 189 of the Act. Accordingly the provisions of paragraph 3(iii)of the Order are not applicable to the Company. However loans granted by the Company to awholly owned subsidiary has been fully provided for in the current year.

(iv) According to the information and explanations given to us the Company has notgiven any loans guarantees or securities during the year that would attract provisions ofsection 185 of the Act. The Company has complied with the provisions of Section 186 of theAct with respect to investments made and loans given. The Company has not provided anyguarantees or security under the provisions of Section 186 of the Act.

(v) According to the information and explanations given to us the Company has notaccepted any deposits from the public as per the directives issued by the Reserve Bank ofIndia and the provisions of Sections 73 to 76 or any other relevant provisions of the Actand the rules framed thereunder. Accordingly the provisions of paragraph 3(v) of theOrder are not applicable to the Company.

(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules prescribed by the Central Government for maintenance of cost records underSection 148(1) of the Act in respect of the products manufactured by the Company and areof the opinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including Goods and services tax Duty ofcustoms Cess and any other material statutory dues have been regularly deposited duringthe year by the Company with the appropriate authorities. According to the information andexplanations given to us and on the basis of our examination of the records of theCompany amounts deducted/accrued in the books of account in respect of undisputedstatutory dues of Profession tax Provident Fund Employees' State Insurance andIncome-tax have generally been regularly deposited during the year with the appropriateauthorities though there have been slight delays in few cases. As explained to us by themanagement the Company did not have any dues on account of Sales-tax Service tax Dutyof excise and Value added tax.

According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees' State Insurance Income- tax Goods andservices tax Duty of customs Cess and any other material statutory dues were in arrearsas at 31 March 2020 for a period of more than six months from the date they becamepayable.

(b) According to the information and explanations given to us there are no dues ofIncome Tax Sales tax Value added tax Service tax Goods and services tax Duty ofcustoms and Duty of excise which have not been deposited with the appropriate authoritieson account of any dispute except as mentioned below:

Name of the statute Nature of the dues Total amount under dispute (Rs. in lakhs) Amount paid under protest (Rs in lakhs) Period to which the amount relates Forum where dispute is pending
Central Sales Tax Act 1956 Central Sales tax 1459.52 304.83 2005-2006 to 2009-2010 and 2012-2013 to 2015-2016 Appellate and Revision Board
30.45 7.61 2005-2006 Sales Tax Appellate Tribunal
64.19 - 2014-2015 Assistant Commissioner
0.89 0.42 2010-2011 Deputy Commissioner
590.41 58.58 2016- 2017 and 2017- 2018 Senior Joint Commissioner
West Bengal Value Added Tax Act 2003 Value added tax 905.86 - 2008-2009 West Bengal Taxation Tribunal
2204.70 19.36 2005-2006 to 2007-2008 2009- 2010 to 2010- 2011 and 2013-2014 Appellate and Revision Board
257.91 2005-2006 Senior Joint Commissioner -Special Cell
Chhattisgarh Value Added Sales Tax Act 2003 Value Added Tax 2.30 1.48 2010-2011 Deputy Commissioner
The Central Excise Act 1944 Duty of Excise 2061.27 - 2011 to 2016 Hon'ble High Court of Calcutta
0.31 0.09 2011-2012 to 20142015 Custom Excise and Service Tax Appellate Tribunal
27.68 1.48 2004 to 2006 20122013 and 2014 to 2017 Commissioner (Appeals) of Central Excise
The Custom Act 1962 Duty on Custom 28.83 3.00 2000-2001 Custom Excise and Service Tax Appellate Tribunal
Finance Act 1994 Service tax 3.98 0.13 2010-2015 Custom Excise and Service Tax Appellate Tribunal
Chhattisgarh Entry Tax Act 1976 Entry tax 313.57 226.89 2012-2014 and 2015-2017 Hon'ble High Court of Judicature Chhatisgarh at Bilaspur
165.32 21.49 2014-2015 Assistant Commissioner
The West Bengal Tax on entry of Goods into Local Areas Act 2012 Entry tax 964.42 - 2012-2013 and 2017-2018 Hon'ble High Court of Calcutta
4064.40 - 2013-2014 to 20162017 West Bengal Taxation Tribunal
Income -tax Act 1961 Income tax 3413.28 973.70 2010-201120112012 2013-2014 and 2016-2017 Commissioner of Income-tax (Appeals)

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of loans or borrowings to any financialinstitution banks or dues to debenture holders during the year. The Company did not haveany outstanding loan or borrowings from government during the year.

(ix) According to the information and explanations given to us and based on ourexamination of the records of the Company during the year the Company has not raised anymoney by way of initial public offer or further public offer (including debt instruments)and term loans. Accordingly the provisions of paragraph 3(ix) of the Order are notapplicable to the Company.

(x) According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during theyear.

(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid or provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 of the Act read with Schedule V to the Act.

(xii) According to the information and explanations given to us the Company is not aNidhi Company. Accordingly the provisions of paragraph 3(xii) of the Order are notapplicable to the Company.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with Section 177 and Section 188 of the Act where applicable and details ofsuch transactions have been disclosed in the standalone financial statements as requiredby the applicable accounting standards.

(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly the provisions of paragraph 3(xiv) of the Order are not applicableto the Company.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with directors or persons connected with them as per Section 192 of the Act.Accordingly the provisions of paragraph 3(xv) of the Order are not applicable to theCompany.

(xvi) According to the information and explanations given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.Accordingly the provisions of paragraph 3(xvi) of the Order are not applicable to theCompany.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W/W-100022
Sd/-
Jayanta Mukhopadhyay
Partner
Place: Kolkata Membership No. 055757
Date: 21 July 2020 UDIN: 20055757AAAACJ4289

Annexure B

To the Independent Auditors' Report on the Standalone Financial Statements of HimadriSpeciality Chemical Limited for the year ended 31 March 2020

Report on the internal financial controls with reference to the aforesaid StandaloneFinancial Statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013

[Referred to in paragraph 2(A)(f) under 'Report on Other Legal and RegulatoryRequirements' section of our report of even date]

Opinion

We have audited the internal financial controls with reference to financial statementsof Himadri Speciality Chemical Limited ("the Company") as of 31 March 2020 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.

In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at 31 March 2020 based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India ("the Guidance Note").

Management's Responsibility for Internal Financial Controls

The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013 (hereinafter referred to as"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 prescribed underSection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of such internal financial controlsassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors' judgement including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the Company's internal financial controls withreference to financial statements.

Meaning of Internal Financial Controls with reference to financial statements

A company's internal financial controls 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 include those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the Company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the Company are being made only in accordance withauthorisations of management and directors of the Company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the Company's assets that could have a material effect on the financialstatements.

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.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W/W-100022
Sd/-
Jayanta Mukhopadhyay
Partner
Place: Kolkata Membership No. 055757
Date: 21 July 2020 UDIN: 20055757AAAACJ4289

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