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Hindustan Organic Chemicals Ltd.

BSE: 500449 Sector: Industrials
NSE: HOCL ISIN Code: INE048A01011
BSE 00:00 | 13 Sep 16.79 0.48
(2.94%)
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NSE 05:30 | 01 Jan Hindustan Organic Chemicals Ltd
OPEN 16.50
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VOLUME 41660
52-Week high 40.30
52-Week low 10.70
P/E
Mkt Cap.(Rs cr) 113
Buy Price 16.81
Buy Qty 325.00
Sell Price 16.79
Sell Qty 60.00
OPEN 16.50
CLOSE 16.31
VOLUME 41660
52-Week high 40.30
52-Week low 10.70
P/E
Mkt Cap.(Rs cr) 113
Buy Price 16.81
Buy Qty 325.00
Sell Price 16.79
Sell Qty 60.00

Hindustan Organic Chemicals Ltd. (HOCL) - Auditors Report

Company auditors report

To the Members of Hindustan Organic Chemicals Limited Report on the RevisedStandalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of M/s.Hindustan Organic Chemicals Limited ("the Company") which comprise theBalance Sheet as at March 31s 2018 and the Statement of Profit and Loss(including other comprehensive income) the Cash Flow Statement and the Statement ofChanges in Equity for the year then ended and a summary of the significant accountingpolicies and other explanatory information (hereinafter referred to as "standaloneInd AS financial statements").

Management's Responsibility for the Revised Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone IndAS financial statements to give a true and fair view of the financialposition financial performance including other comprehensive income cash flows andchanges in equity of the Company in accordance with the accounting principles generallyaccepted in India including the Indian Accounting Standards (Ind AS) specified underSection 133 of the Act read with Companies (Indian Accounting Standards) Rules 2015.

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 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 Ind AS financial statements that give a true and fair view and are freefrom material misstatement whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financialstatements based on our audit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act and other applicable authoritative pronouncements issued by theInstitute of Chartered Accountants of India. Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the standalone Ind AS financial statements. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the standalone Ind AS financial statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the standalone Ind AS financial statements thatgive a true and fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the standalone Ind ASfinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Act in the manner so required and give a true and fair view inconformitywith the accounting principles generally accepted in India including Ind AS of thefinancial position of the Company as at 31s March 2018 and its financialperformance including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.

Emphasis of Matter

(a) Attention is drawn to Note no. 31 to the standalone IndAS financial statementswhich state that the Government of India has approved the restructuring plan of thecompany which includes closure of all the plants at Rasayani unit except the Conc. NitricAcid/N2O4 Plant which is now handed over to ISRO and VRS to the employees is also providedexcept those associated with operation of Conc. Nitric Acid / N2O4 plant at Rasayani andthe skeletal staff required to implement the proposed restructuring. However Kochi unitis operational in view of this the financial statement has been prepared on GoingConcern basis.

(b) The balances of trade payables loans & advances and other current assets andother debit/credit balances are pending for confirmations and reconciliation (Note no.36). The effect on the same on the loss is not ascertainable.

(c) Attention is drawn to Note no. 13(c)(iv) to the standalone IndAS financialstatements which state that the Company has made provision for penal interest onGovernment loan however no provision has been made for interest on interest as per thesanction terms of the loan. Interest on interest has not been provided fromthe year 01.04.2001 to 31.03.2018 amounting to ' 24163 lakhs accordingly loss to thesaid extent over the period of years has not been booked.

Other Matter

We did not audit the IndAS financial statements / information of the Kochi unitincluded in the standalone IndAS financial statements of the Company whose financialstatements / information reflecting the total assets of ' 20954.81 lakhs (excludinginter-branch balance) as at 31st March 2018 and total revenue of ' 22525.24lakhs and total comprehensive loss of ' (5031.52) lakhs for the year ended on that dateas considered in the standalone IndAS financial statement. The IndAS financial statement /information of the unit has been audited by the Independent Branch Auditors whose reporthas been furnished to us and our opinion in so far as it relates to the amounts anddisclosures included in respect of this unit is based solely on the report of such BranchAuditor.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by ‘the Companies (Auditor's Report) Order 2016' issued by theCentral Government of India in terms of sub section (11) of section 143 of the Act(hereinafter referred to as "Order") we give in the Annexure A statement ofthe matters specified in paragraphs 3 and 4 of the Order.

2. As required by the directions and sub-directions issued by the office of theComptroller & Auditor General of India under section 143(5) of the Act we give in theAnnexure B a statement on the matters referred to in those directions.

3. 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 report on the accounts of the Branch office of the Company audited under section143(8) of the Act by the Branch Auditors have been sent to us and have been properly dealtwith by us in preparing this report.

d) The Balance Sheet Statement of Profit and Loss the Cash Flow Statement and thestatement of changes in equity dealt with by this Report are in agreement with the booksof accounts of the company.

e) In our opinion the aforesaid standalone Ind AS financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.

f) As per the notification no. G.S.R. 463(E) dated June 05 2015 the Governmentcompanies are exempted from provisions of section 164(2) of the Act. Accordingly we arenot required to report whether any directors are disqualified in terms of provisionscontained in the said section.

g) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in Annexure C and

h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our knowledge and belief and according to the information andexplanations given to us:

i. The Company has disclosed the impact of pending litigations on it financial positionin its financial statements - Refer Note no. 37 to the IndAS financial statements;

ii. The Kochi unit of the Company has entered into long term transmission contract withGas Authority of India Limited (GAIL) for the supply of Liquefied Natural Gas in the year2011 for the period of 15 years ending in 2026. Material foreseeable loss on this contractis not quantifiable in current scenario. Other than this the Company did not have anylong-term contracts including derivative contracts for which there were any materialforeseeable losses;

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company during the year ended March 31 2018.

4. Based on the observations of the Comptroller and Auditor General of Indiaadditions/revisions have been carried out. We give in the Annexure D the statements ofthe said additions/revisions which has been carried out.

For M B Agrawal & Co.
Chartered Accountants
FRN No: 100137W
Sd/-
Harshal Agrawal
Place: Mumbai Partner
Date: 27th August 2018 Membership No: 109438

Annexure - A to Independent Auditors' Report

(Referred to in Paragraph 1 of the Independent Auditors' Report to the Members of evendate)

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

(b) The fixed assets have been physically been verified by the management at reasonableintervals.

In Kochi unit verification of the fixed assets was carried out during the year.

In Rasayani unit the Company carried out Impairment study by an external independentagency and incorporated impairment losses appropriately in the books of account.

(c) The title deeds of immovable properties are held in the name of the Company.

ii. (a) The inventory has been physically verified by the management at reasonableintervals during the year.

(b) The Company has made proper records of inventory. As explained to us thediscrepancies between the physical inventory and the books records noticed on physicalverification were not material.

iii. According to the information and explanations given to us the Company has grantedsecured loan to its subsidiary - Hindustan Flurocarbons Ltd (HFL) and unsecured advance inthe nature of loan to its joint venture subsidiary company - HOC Chematur Ltd. covered inthe register maintained under section 189 of the Companies Act 2013 in respect of which:

(a) The loan to HFL is interest free to the extent of ' 2744.06 lakhs under BIFRagreement and has varying interest rates of 10.25% to 14.5% on amount of ' 453.01 lakhs.Both the principal amount and interest on this loan has not been received by the Companyas per stipulation.

(b) The advance to HOC-Chematur Ltd. of' 1064.46 lakhs is interest free and there is nostipulation as to repayment of principal. The advance has been fully written off againstprovision made as it is doubtful recovery.

(c) In both the cases except follow up the company has not taken any other steps forrecovery of dues.

iv. The Company has not entered into any transaction regarding the provisions ofsection 185 and 186 of the Companies Act 2013 except for guarantee given by the HoldingCompany of ' 603 lakhs for the loans taken by the subsidiary - HFL from bank. Based onthe information and explanation given to us the terms and condition of this guarantee arenot prejudicial to the interest of the Holding Company.

v. According to information and explanations provided to us the company has notobtained deposit from public as defined according to the provisions of Section 73 to 76 ofthe Companies Act 2013 and the Rules framed thereunder.

vi. We have broadly reviewed the books of accounts maintained by the company inpursuance to the rules made by the Central Government for maintenance of cost recordsunder sub-section (1) of section 148 of the Act for the certain products of the companyand are of the opinion that prima facie and prescribed accounts and records have beenmaintained. We have not however made a detailed examination of the records with a viewto determine whether they are accurate or complete.

vii. (a) According to information and explanations given to us and the records of theCompany examined by us in our opinion the Company is generally regular in depositing theundisputed statutory dues including provident fund employees' state insurance duty ofcustoms duty of excise income tax sales tax service tax value added tax goods andservice tax cess and other material statutory dues as applicable with the appropriateauthorities.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance duty of customs duty ofexcise income tax sales tax service tax value added tax goods and service tax cessand other material statutory dues were in arrears as at March 31st 2018 for aperiod of more than six months from the date they became payable.

(c) According to the information and explanations given to us and based on the recordsof the company examined by us there are no dues of provident fond employees' stateinsurance duty of customs duty of excise income tax sales tax service tax valueadded tax goods and service tax cess and other material statutory dues which have notbeen deposited on account of any disputes other than those shown below:

Sr. No. Name of Statute Nature of Dues Period to which the amount relates (F.Y.) Amount of dispute (' In lakhs) Forum where the dispute is pending
1 Central Excise Act 1944 Molten Sulphur Classification 1997-98 15.53 Customs Excise and Service Tax Appellate Tribunal
2 Central Excise Act 1944 Molten Sulphur Classification 1994-95 to 1996-97 15.53 Customs Excise and Service Tax Appellate Tribunal
3 Central Excise Act 1944 Shortage of inputs 1998 to 2001 18.66 Bombay High Court
4 Central Excise Act 1944 Shortage of inputs 2001-02 to 2002-03 5.85 Bombay High Court
5 Central Excise Act 1944 ARO Case (Aniline product valuation) 2003-04 to 2006-07 19.29 Customs Excise and Service Tax Appellate Tribunal
6 Central Excise Act 1944 N2O4 Exemption 2006-07 to 2007-08 104.63 Customs Excise and Service Tax Appellate Tribunal
7 Central Excise Act 1944 Duty clearance on Molten Sulphur 1998-99 5.05 Deputy Commissioner Central Excise
8 Central Excise Act 1944 Duty clearance on Molten Sulphur 1998-99 2.59 Deputy Commissioner Central Excise
9 Finance Act 1994 Wrong credit availed 2007-08 to 2010-11 1.44 Assistant Commissioner Central Excise
10 Finance Act 1994 Cleaning gardening and Rent-a-cab services 2009-10 to 2011-12 8.88 Deputy Commissioner of Central Excise
11 Finance Act 1994 Service tax on canteen services 2006-07 to 2010-11 66.96 Commissioner of Central Excise Custom and Service tax
12 Finance Act 1994 Capital goods bill of entry wrong address 2013- 14 to 2014- 15 17.58 Commissioner of Central Excise (Appeals) Mumbai
13 Finance Act 1994 Credit disallowed 2006-07 9.34 CESTAT
14 Finance Act 1994 Penalty and interest payment 2013- 14 to 2014- 15 10.95 Superintendent of Service tax
15 Finance Act 1994 Molten Sulphur classification 1999 7.62 Commissioner of Central Excise
16 Finance Act 1994 Shortage of input 13.64 Commissioner of Central Excise
17 Finance Act 1994 Credit disallowed 2006-07 18.66 Commissioner of Central Excise
18 Finance Act 1994 Credit disallowed 2015-16 17.80 Joint Commissioner of Central Excise
19 Finance Act 1994 Works contract services 8.90 Commissioner of Central Excise Appeals
20 Income Tax Act 1961 Penalty under section 271j11c] 1998-1999 0.00 Before the Income Tax Appellate Tribunal
21 Income Tax Act 1961 Quantum Appeal 1998-1999 0.00 Before High Court
22 Income Tax Act 1961 Penalty under section 271(1) R.w.s 263 1998-1999 0.00 Commisioner of Income Tax Appeals Mumbai
23 Income Tax Act 1961 Penalty under section 271j11c] 2001-02 yet to be determined High Court
24 Income Tax Act 1961 Penalty under section 2ZJi!c] 2002-03 4.66 Before the Income Tax Appellate Tribunal
25 Income Tax Act 1961 Quantum Appeal 2002-03 No demand Before High Court
26 Income Tax Act 1961 Penalty under section 271j11c] 2003-04 yet to be determined Before the Income Tax Appellate Tribunal
27 Income Tax Act 1961 Quantum Appeal 2003-04 0.00 Before High Court
28 Income Tax Act 1961 Disallowance of expenses 2005-06 0.00
29 Income Tax Act 1961 Disallowance of expenses 2006-07 0.00 High Court
30 Income Tax Act 1961 Disallowance of expenses 2005 to 2008 0.00 High Court
31 Income Tax Act 1961 Disallowance of expenses 2008-09 0.00 Dispute pending before the high court
32 Income Tax Act 1961 Disallowance of expenses 2009-10 N.A.
33 Income Tax Act 1961 Disallowance of expenses 2010-11 404.71 Commisioner of Income Tax Appeals Mumbai
34 Income Tax Act 1961 Disallowance of expenses 2011-12 81.03 Commisioner of Income Tax Appeals Mumbai
35 Income Tax Act 1961 Disallowance of expenses 2012-13 106.51 Commisioner of Income Tax Appeals Mumbai
36 Income Tax Act 1961 Disallowance of expenses 2012-13 80.71 Commisioner of Income Tax Appeals Mumbai

Kochi Unit:

1 Finance Act 1994 Service tax on Inter unit goods transfer 2003 to 2006 43.36 CESTAT Bangalore
2 Finance Act 1994 Tyre re trading charges - Service tax 2011-12 3.17 CESTAT Bangalore
3 Finance Act 1994 Service tax on Bus transportation to employees 2011-12 1.10 Commissioner (Appeals) Ernakulam
4 Finance Act 1994 Tyre re trading charges - Service tax 2012-13 10.96 Commissioner (Appeals) Ernakulam
5 Finance Act 1994 Disallowance of Cenvat Credit 2006 to 2013 83.32 CESTAT Bangalore
6 ESI Corporation Payment of ESI contribution during the period from 01.04.1992 to 31.10.1992 2004 2.17 ESI Court Ernakulam
7 Central Sales Tax Act 1956 Levy of Interest 2005-06 155.23 Tribunal Dept of Commercial Taxes Ernakulam
8 KVAT Act 2003 Levy of Interest 2005-06 152.63 Tribunal Dept of Commercial Taxes Ernakulam
9 Central Sales Tax Act 1956 Disallowance of Input tax credit 2012-13 73.36 Deputy Commissioner (Appeals) Ernakulam
10 KVAT Act 2003 Demand u/s 25(1) 2011-12 714.58 Commissioner of Commercial Taxes Thiruvananthpuram

viii. In our opinion and according to the information and explanations given to us inabsence of adequacy of funds the company has made default in repayment of dues toGovernment loan as per stipulation. Details of default made by the company are as follows:

S.N. Amount of default as at 31st March 2018 Period of Default
1 61.60 2002-03
2 152.60 2003-04
3 212.60 2004-05
4 268.50 2005-06
5 328.50 2006-07
6 388.50 2007-08
7 448.50 2008-09
8 804.50 2009-10
9 749.10 2010-11
10 749.10 2011-12
11 687.50 2012-13
12 828.50 2013-14
13 768.50 2014-15
14 412.00 2015-16
15 844.20 2016-17
16 1336.40 2017-18
Total 8980.60

ix. The company has not raised any money via initial public offer or by way of furtherpublic offer or term loans and hence reporting under para 3(ix) of the Order is notapplicable.

x. According to the information and explanations given to us we have neither comeacross any instance of material fraud on or by the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.

xi. The Company has paid or provided managerial remuneration during the year underaudit in accordance with the requisite approvals mandated by the provisions of section 197read with Schedule V to the Companies Act.

xii. In our opinion the company is not a Nidhi Company. Accordingly paragraph 3(xii)of the Order is not applicable.

xiii. According to the information and explanations provided to us and based on ourexamination of the records of the Company all transactions with the related parties arein compliance with Section 177 and 188 of Companies Act 2013 where applicable and thedetails have been disclosed in the standalone Ind AS financial statements as required bythe applicable Indian accounting standards.

xiv. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly paid convertible debentures and hence reportingunder clause 3 (xiv) of the Order is not applicable to the Company.

xv. According to the information and explanations provided 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 him. Accordingly paragraph 3(xv) ofthe Order is not applicable.

xvi. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.

For M B Agrawal & Co.
Chartered Accountants
FRN No: 100137W
Sd/-
Harshal Agrawal
Place: Mumbai Partner
Date: 27* August 2018 Membership No: 109438

Annexure B to the Independent Auditors Report

To the Members of Hindustan Organic Chemicals Limited for the year ended 31stMarch 2018 (Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements)

As required by the directions and sub-directions issued by the Office of theComptroller and Auditor General of India under Section 143(5) of the Act we give belowour comments on the matter referred therein

1. Whether the Company has clear title/lease deeds for freehold and leaseholdrespectively? If not please state the area of freehold & leasehold land for whichtitle/lease deeds are not available?

Kochi unit :

Based on the information and explanation given to us we report that the unit has cleartitle deeds for freehold land. The unit does not have any leasehold land.

Rasayani unit:

Based on the information and explanation given to us we report that the unit has cleartitle/lease deeds for freehold/ leasehold land.

2. Please report whether there are any cases of waiver/ write off ofdebts/loans/interest etc. if yes the reasons there for and the amount involved.

Kochi unit :

According to the information and explanation given to us there are no write offs ofdebts in the company.

Rasayani unit :

According to the information and explanation given to us there are no write offs ofdebts in the company.

3. Whether proper records are maintained for inventories lying with third parties &assets received as gift from Govt. or other authorities?

Kochi unit :

The unit does not maintain inventory at third party locations. The unit has notreceived any gift from Government or other authorities.

Rasayani unit :

The unit does not maintain inventory at third party locations. The unit has notreceived any gift from Government or other authorities.

4. State the area of land under encroachment and briefly explain the steps taken by theCompany to remove the encroachment.

Rasayani unit:

As informed to us in Rasayani unit land measuring 39.63 acres (approx.) is underencroachment as per the report of the consultant appointed in 2015 and there is publicroad constructed approximating 10.776 acres. In the financial statements the land atRasayani to the extent of 39.63 acres have not been revalued total amounting to ' 5548.20lakhs.

The company has during the year initiated Survey proceedings of land by Government ofMaharashtra and the survey of entire land is in progress. The impact in the financialstatements on account of the above if any would be subject to the final encroachmentdetermined on the completion of the survey.

For M B Agrawal & Co.
Chartered Accountants
FRN No: 100137W
Sd/-
Harshal Agrawal
Place: Mumbai Partner
Date: 27th August 2018 Membership No: 109438

Annexure - C to Independent Auditors' Report

To the Members of Hindustan Organic Chemicals Limited for the year ended 31st March2018

(Referred to in Paragraph 3(f) of the Independent Auditors' Report of even date)

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act

2013 ("the Act")

1. We have audited the internal financial controls over financial reporting ofHindustan Organic Chemicals Limited ("the Company") as of March 31s2018 in conjunction with our audit of the standalone Ind AS financial statements of theCompany for the year ended on that date.

Management's Responsibility for Internal Financial Controls

2. 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 Reportingissued by the Institute of Chartered Accountants of India (‘ICAI'). 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.

Auditors' Responsibility

3. Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the ICAI. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls overfinancial reporting was established and maintained and if such controls operatedeffectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

6. A company's internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that

(a) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

(b) 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

(c) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

7. Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

8. According to the information and explanation given to us the Company has notestablished its internal financial control over financial reporting on criteria based onor considering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India. Because of this reason we are unable to obtain sufficientappropriate audit evidence to provide a basis for our opinion whether the Company hadadequate internal financial controls over financial reporting and whether such internalfinancial controls were operating effectively as at March 31 2018.

For M B Agrawal & Co.
Chartered Accountants
FRN No: 100137W
Sd/-
Harshal Agrawal
Place: Mumbai Partner
Date: 27* August 2018 Membership No: 109438

Annexure - D to Independent Auditors' Report

To the Members of Hindustan Organic Chemicals Limited for the year ended 31st March2018 (Referred to in Paragraph 4 of the Independent Auditors' Report to the Members ofeven date)

Based on the observations of the Comptroller and Auditor General of India followingadditions / revisions have been carried out :

Additions/Revisions in the Audit report:

1) Non-applicability of the provisions of section 164(2) of the Companies Act 2013being a Government Company. Refer note 3(f) of the Independent Audit Report.

2) Amendments to the sub-directive under section 143(5) regarding the title deeds andother matter pertaining to Rasayani/Kochi Unit. Refer Annexure B of the Independent AuditReport.

Additions/Revisions in the Accounts:

Sl. No. Note No. Subject
a. 9 Cash and Cash Equivalents:
Deposits with original maturity of less than three months increased by ' 12.52 lakhs.
b. 10 Other Financial Assets
Accrued Interest on Deposit increased by ' 1.26 Lakhs.
c. 6b Other Curent Assets
Statutory receivable - Duties and Taxes Increased by ' 2.74 lakhs
d. 12b Retained Earnings
Profit / (Loss)- Loss increased by ' 29.15 lakhs
c. 14b Trade Payables:
Increase in Trade payable by '11.81 lakhs
d. 15b Short Term Provisions
Penal Interest on GoI loan additional provided ' 26.81 lakhs
e 19 Other Liabilities:
Increase in liabilities by '7.05 Lakhs.
f 21 Other Income
Interest Income increase by ' 16.52 lakhs (27.40+1.26-12.14)
g 24 Employee Benefit Expenses
Wage revision arrears ' 2207 Lakhs to Employees reclassified from Other Expenses
(Prior Year expenses) to Employees Benefit Expenses in 2016-17.
h 27 Other Expenses
Increase in Repairs & Maintenance by 1.33 lakhs Admin Expenses by ' 17.53 Lakhs and GoI loan Penalty by ' 26.81 Lakhs

The following additional Notes / modification to Notes given in compliance withprovisions of Ind AS.

a. 3d Non- Current Assets held for sale .
b. 13(iv) GoI loan Penal Interest on interest ' 24163 Lakhs not provided. Please refer to para (c) on Emphasis of Matter of our Report.
c. 29c Employee Benefit Plan on account amendment to Gratuity Actuarial valuation assumptions.
d. 37 Related Party disclosure related to Subsidiary Company Trusts and significant transaction with other Govt. Companies and Key Managerial Personnel.
e 39I Reconciliation of Equity.
f 39II Reconciliation of Statement of Profit and Loss
g Cash flow statement
h 39III Effect of Ind AS adoption on Cash Flow.

 

For M B Agrawal & Co.
Chartered Accountants
FRN No: 100137W
Sd/-
Harshal Agrawal
Place: Mumbai Partner
Date: 27th August 2018 Membership No: 109438