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Hindustan Organic Chemicals Ltd.

BSE: 500449 Sector: Industrials
NSE: HOCL ISIN Code: INE048A01011
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NSE 05:30 | 01 Jan Hindustan Organic Chemicals Ltd
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VOLUME 53224
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Sell Qty 150.00
OPEN 13.70
CLOSE 14.00
VOLUME 53224
52-Week high 18.05
52-Week low 5.85
P/E
Mkt Cap.(Rs cr) 97
Buy Price 14.25
Buy Qty 200.00
Sell Price 14.42
Sell Qty 150.00

Hindustan Organic Chemicals Ltd. (HOCL) - Auditors Report

Company auditors report

To the Members of Hindustan Organic Chemicals Limited

Report on the Audit of the Revised standalone financial statements

Opinion

We have audited the revised standalone financial statements of Hindustan OrganicChemicals Limited ("the Company") which comprise the balance sheet as at 31stMarch 2019 and the statement of profit and loss (including Other Comprehensive Income)statement of changes in equity and statement of cash flows for the year then a summary ofsignificant accounting policies and other explanatory information (hereinafter referred toas ‘the revised standalone financial statements').

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid revised standalone financial statements give the informationrequired by the Companies Act 2013 in the manner so required and give a true and fairview in conformity with the Indian Accounting Standards prescribed under section 133 ofthe Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended(‘IndAS') and other accounting principles generally accepted in India of the stateof affairs of the Company as at March 31 2019 and its profit and total 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 Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.

Key Audit Matter Auditor's Response
1 Evaluation of uncertain tax positions Principal Audit Procedures
The Company has material uncertain tax positions including matters under dispute which judgment to involves significant determine the possible outcome of these disputes. Refer Notes no. vii(c) of Annexure A to this Auditors Report Obtained details of completed tax assessments and demands for the year ended March 31 2019 from management. We involved an external expert to challenge the management's underlying assumptions in estimating the tax provision and the possible outcome of the disputes. The external expert also considered legal precedence and other rulings in evaluating management's position on these uncertain tax positions. Additionally we considered the effect of new information in respect of uncertain tax positions as at April 1 2018 to evaluate whether any change was required to management's position on these uncertainties.
2 Recoverability of Trade Receivables Principal Audit Procedure
As at March 31 2019 current asset in respect of Trade Receivables in respect of Rasayani Unit includes recoverable amounting to Rs. 2007.68 lakhs which are pending legal dispute. We have reviewed the nature of the amounts recoverable the sustainability and the likelihood of recoverability upon final resolution.
The above amount refers to the major portion of Trade Receivable.
Refer Note no. 8 to the Revised standalone financial statements
3 Reversal of penal interest on Government of India (GoI) Loan Principal Audit Procedure
The Company has reversed the provision for penal interest in respect of GoI Loan amounting to Rs. 2004.30 lakhs in respect of previous years. We have reviewed the letter received by the Company from the Ministry of Petrochemicals Government of India which clarified that the Penal interest and Interest on interest is payable only when the sanctioning authority uses its right to demand apart from the same all interest is due and payable. We have obtained the said documentation from the management.
Re-instatement of interest on Government of India Loan of Rs. 758.97 lakhs written in the books of accounts in the earlier years(.Refer Note no. 13b(ii)and 25(i)of the revised standalone financial statements.

Other Information

The Company's Board of Directors is responsible for the other information.

The other information comprises the information included in the Management Discussionand Analysis Report including Annexures to Board's Report Corporate Governance andShareholder's information and the chairman's statement' but does not include the financialstatements and our auditor's report thereon which we obtained prior to the date of thisauditor's report. Our opinion on the financial statements does not cover the otherinformation and we do not and will not express any form of assurance conclusion thereon.In connection with our audit of the financial statements our responsibility is to readthe other information identified above and in doing so consider whether the otherinformation is materially inconsistent with the financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated.

If based on the work we have performed on the other information that we obtained priorto the date of this auditor's report we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.

Responsibilities of Management and Those Charged with Governance for the Revisedstandalone 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 revised standalone financial statements that give a true and fair view of thefinancial position financial performance total comprehensive income changes in equityand cash flows of the Company in accordance with IndAS and other accounting principlesgenerally accepted in India. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding of theassets of the Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.

In preparing the financial statements the Board of Directors 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 unlessthe Board of Directors either intends to liquidate the Company or to cease operations orhas no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.

• 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 Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls system in place and the operatingeffectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by 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 doubt on the Company's ability to continue asa going maycastsignificant concern. If we conclude that a material uncertainty exists weare required to draw attention in our auditor's report to the related disclosures in thefinancial statements or if such disclosures are inadequate to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

• Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the financial statements individuallyor in aggregate makes it probable that the economic decisions of a reasonablyknowledgeable user of the financial statements may be influenced We consider quantitativemateriality and qualitative factors in (i) planning the scope of our audit work and inevaluating the results of our work; and (ii) to evaluate the effect of any identifiedmisstatements in the financial statements.

We communicate with those charged with governance regarding among other matters theplanned scope and timing ofthe significantaudit findingsand deficiencies in internalcontrol that we identify during including anysignificant our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

Other Matter

We did not audit the financial statements/ information of Kochi unit included in therevised standalone financial statements of the Company whose financialstatements/financial information reflect total assets of Rs. 24016.42 lakhs (excludinginter branch balance) as at 31st March 2019 and total revenue of Rs. 47199.01 lakhs andtotal comprehensive profit of Rs. 4326.20 lakhs for the year ended on that date asconsidered in the revised standalone financial statements. The financialstatements/information of Kochi unit have been audited by the branch auditor whose reportshave been furnished to us and our opinion in so far as it relates to the amounts anddisclosures included in respect of branch 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 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the ‘Annexure A' a statement on the mattersspecifiedin paragraphs 3 and 4 of the Order to the extent applicable.

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 the‘Annexure 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 and proper returnsadequate for the purposes of our audit have been received from the branches not visited byus.

(c) The reports on the accounts of the branch offices of the Company audited underSection 143(8) of the Act by branch auditors have been sent to us and have been properlydealt with by us in preparing this report. (d) The Balance Sheet the Statement of ProfitComprehensive Income the Statement of Changes in Equity and the Cash Flow Statement dealtwith by this Report are in agreement with the books of account and with the returnsreceived from the branches not visited by us.

(e) In our opinion the aforesaid revised standalone financial statements comply withthe IndASspecified under Section 133 of the Act read with Rule 7 of the Companies(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 director(s) are disqualified in terms of provisionscontained in 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'.

(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 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 on its financialposition in its financial statements Refer Note no. 36 to the financial statements;

ii. The Company has entered into long term transmission contract with the Gas Authorityof India Limited (GAIL) for transmission of Liquified Natural Gas in 2011 for a period of15 years ending in 2026. Material foreseeable losses cannot be identified in the currentscenario. The Company did not have any other derivative contract.

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

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

 

For M. B. Agrawal & Co.
Chartered Accountants
(Firm’s Registration No. 100137W)
sd/-
Harshal Agrawal
Partner
Place : Mumbai (Membership No. 109438)
Date : 29-July-2019 UDIN : 19109438AAAACG4370

 

ANNEXURE ‘A' TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1 under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Hindustan Organic Chemicals Limitedof even date)

i. In respect of fixed assets:

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

b. The Company has a program of verification to cover all the items of fixed assets ina phased manner which in our opinion is reasonable having regard to the size of theCompany and the nature of its assets. Pursuant to the program certain fixed assets werephysically verified by the management during the year. According to the information andexplanations given to us no material discrepancies were noticed on such verification.

c. According to the information and explanations given to us the records examined byus and based on the examination of the conveyance deeds / registered sale deed provided tous we report that the title deeds comprising all the immovable properties of land andbuildings which are freehold are held in the name of the Company as at the balance sheetdate.

ii. In respect of inventories:

a. The inventory has been physically verified by the management at reasonable intervalsduring the year.

b. The Company has maintained proper records of inventory. As explained to us thediscrepancies between the physical inventory and the book records were not material.

iii. According to the information and explanations given to us the Company has grantedsecured and unsecured loans to one body corporate covered in the register maintainedunder section 189 of the Companies Act 2013 in respect of which:

a. The secured loan to one body corporate is interest free to the extent of Rs. 2744.06lakhs under BIFR agreement and has varying interest rates on amount of Rs. 453.01 lakhs.

b. Both principal and interest on the above mentioned loan has not been received by theCompany during the year as per stipulation.

c. In the above case except follow up the company has not taken any other steps forits recovery.

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 Rs. 603 lakhs for the loans taken by its subsidiary Hindustan FluorocarbonsLimited from bank. Based on the information and explanation given to us the terms andcondition of this guarantee are not prejudicial to the interest of the Holding Company.

v. The Company has not accepted deposits during the year and does not have anyunclaimed deposits as at March 31 2019 and therefore the provisions of the clause 3 (v)of the Order are not applicable to the Company.

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. According to the information and explanations given to us in respect of statutorydues:

a. The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Employees' State Insurance Income Tax Goods and Service TaxCustoms Duty Cess and other material statutory dues applicable to it with the appropriateauthorities.

b. There were no undisputed amounts payable in respect of Provident Fund Employees'State Insurance Income Tax Goods and Service Tax Customs Duty Cess and other materialstatutory dues in arrears as at March 31 2019 for a period of more than six months fromthe date they became payable.

c. Details of dues of Income Tax Sales Tax Service Tax Excise Duty and Value AddedTax which have not been deposited as at March 31 2019 on account of dispute are givenbelow:

Rasayani Unit:

Sr. No. Name of Statue Nature of Dues Period to which the amount relates (F.Y.) Amount of dispute (Rs. In lakhs) Forum where the dispute is pending
1 Central Excise Act 1944 Exemption not allowed 2006-07 2007-08 104.63 Customs Excise & Service Tax Appellate Tribunal
2 Finance Act 1994 Credit disallowed 2006-07 9.34 CESTAT
3 Finance Act 1994 Wrong classification 1999-2000 7.62 CESTAT
4 Finance Act 1994 Service tax on canteen services 2006-07 to 2010-11 66.96 Commissioner of Service tax
5 Income Tax Act 1961 Penalty dues 2001-02 Yet to be determined High Court
6 Income Tax Act 1961 Disallowances of expenses 2010-11 404.71 Commissioner of Income Tax (Appeals) Mumbai
7 Income Tax Act 1961 Disallowances of expenses 2011-12 81.03 Commissioner of Income Tax (Appeals) Mumbai
Kochi Unit
Sr. No. Name of Statue Nature of Dues Period to which the amount relates (F.Y.) Amount of dispute (Rs. In lakhs) Forum where the dispute is pending
1 Finance Act 1994 Disallowance of service tax input credit on inter unit goods transfer 2003 to 2006 43.46 CESTAT Bangalore
2 Finance Act 1994 Disallowance of service tax input credit on Tyreretrading charges 2011-12 3.17 CESTAT Bangalore
3 Finance Act 1994 Disallowance of service tax input credit on employee transportation charges 2011-12 1.10 Commissioner (Appeals) Ernakulam
4 Finance Act 1994 Disallowance of service tax input credit on tyre re- trading charges 2012-13 10.96 Commissioner (Appeals) Ernakulam
5 Finance Act 1994 Disallowance of Cenvat credit 2006 to 2013 83.32 CESTAT Bangalore
6 ESI Act Demand of ESI 2004 2.17 ESI Court Ernakulam
7 Central Sales Tax Act 1956 Disallowance of Input Tax credit 2012-13 73.36 Deputy Commissioner (Appeals) Ernakulam
8 KVAT Act 2003 Demand on assessment 2011-12 714.58 Deputy Commissioner (Appeals) Ernakulam
9 Central Sales Tax Act 1956 Trade discount through Credit note disallowed 2005-06 53.71 Deputy Commissioner (Appeals) Ernakulam
10 Central Sales Tax Act 1956 Trade discount through Credit note disallowed 2006-07 79.67 Deputy Commissioner (Appeals) Ernakulam
11 Central Sales Tax Act 1956 Levy of interest 2006-07 11.87 Deputy Commissioner (Appeals) Ernakulam
12 Central Sales Tax Act 1956 Trade discount through Credit note disallowed 2007-08 6.70 Deputy Commissioner (Appeals) Ernakulam
13 KVAT Act 2003 Demand due to non submission of C Form 2011-12 102.76 Deputy Commissioner (Appeals) Ernakulam

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:

(Rs. In lakhs)
Sr. no. Amount of default as at March 31 2019 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
17 8679.49 2018-19
Total 17660.09

ix. The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) or term loans and hence reporting under clause 3 (ix)of the Order is not applicable to the Company.

x. To the best of our knowledge and according to the information and explanations givento us no fraud by the Company or no material fraud on the Company by its officers oremployees has been noticed or reported during the year.

xi. In our opinion and according to the information and explanations given to us theCompany has paid/provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.

xii. The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of theOrder is not applicable to the Company.

xiii. In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the revised standalone financial statements asrequired by the applicable 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. In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsDirectors or persons connected to its directors and hence provisions of section 192 of theCompanies Act 2013 are not applicable to the Company.

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
(Firm’s Registration No. 100137W)
sd/-
Harshal Agrawal
Place: Mumbai Partner
Date: 29-July-2019 (Membership No. 109438)

ANNEXURE‘B' TO THE INDEPENDENT AUDITOR'S REPORT

To the Members of Hindustan Organic Chemicals Limited for the year ended 31st March2019 (Referred to in paragraph 2 under Report on Other Legal and Regulatory Requirements)

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 system in place to process all the accounting transactionsthrough IT system? If yes the implications of processing of accounting transactionsoutside IT system on the integrity of the accounts along with the financialimplicationsifany may be stated.

Yes all the accounting transactions are processed through IT systems. However thereare two IT systems in place i.e. TallyERP in Rasayani Unit and SAP in Kochi unit. Thecompany does not have process of integrating the two systems causing delay in preparationof financial statements. Consolidation of the Rasayani and Kochi unit as a whole isprepared using MS Office.

2. Whether there is any restructuring of an existing loan or cases of waiver/ write offof debts / loans/interest etc made by a lender to the company due to the company'sinability to repay the loan? If yes the financial impact may be stated.

There are no loans which have been restructured during the year. A restructuring planhas been approved by the Government of India vide order dated May 22 2017. As perrestructuring plan no waiver of interest or principal amount of loans has been granted.As per GoI letter no. P-51015/1/2019 Ch. III dated 27/03/2019 it has been clarified thatno penal interest or interest on interest has been charged by GoI. If they were to becharged then interest on interest would amount to Rs. 312.73 crores and Penal interestwould amount to Rs. 30.71 crores.

3. Whether funds received/receivable for specific schemes from central / state agencieswere properly accounted for / utilized as per its terms and conditions? List the cases ofdeviation.

No the company has not received any fund for specific scheme from central / stateagencies.

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

As informed and as per the information and explanation available to us in RasayaniUnit land admeasuring 66.024 acres is under encroachment as per the report of the surveyconducted by M/s. The Geo Tekdated January 14 2019. Also there is public roadconstructed approximating 10.776 acres. In the financial statements the land at Rasayanito extent of 66.024 acres have not been revalued.

For M. B. Agrawal & Co.
Chartered Accountants
(Firm’s Registration No. 100137W)
sd/-
Harshal Agrawal
Place: Mumbai Partner
Date: 29-July-2019 (Membership No. 109438)

 

ANNEXURE ‘C' TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 3(f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Hindustan Organic Chemicals Limitedof even date)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of HindustanOrganic Chemicals Limited ("the Company") as of March 31 2019 in conjunctionwith our audit of the revised standalone financial statements of the Company for the yearended on that date.

Management's Responsibility for Internal Financial Controls

The Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India. 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 respective company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required CompaniesAct 2013. underthe

Auditor's Responsibility

Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the internal financial controls system overfinancialreporting Company . ofthe

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Limitations of Internal Financial Controls Over Financial Reporting

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

Opinion

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2019 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

 

For M. B. Agrawal & Co.
Chartered Accountants
(Firm’s Registration No. 100137W)
sd/-
Harshal Agrawal
Place: Mumbai Partner
Date: 29-July-2019 (Membership No. 109438)

ANNEXURE ‘D' TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 4 under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Hindustan Organic Chemicals Limitedof even date)

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

Sr. No. Note No. Subject
a. 21 Other Income
Current Year Rs. 11792.50 lakhs is revised as Rs. 11571.30 lakhs.
Previous Year Rs. 6638.77 lakhs is revised as Rs. 6859.97 lakhs.
Net effect is Rs. 221.20 lakhs on account of Excess provision written back previously booked in FY 2018-19 now considered as prior period income and booked in FY 2017-18.
b. 4(A) Investments
Investments in Previous Year Rs. 889.80 lakhs is revised as Rs. 1111.00 lakhs on account of above effect.
c. 12(b) Retained Earnings
Retained Earnings Rs. (118330.06) lakhs in previous year is revised as Rs. (118108.86) lakhs. Net effect is Rs. 221.20 lakhs in previous year.
d. 16 Deferred Tax Liabilities
Decrease in deferred tax liability in current year by Rs. 65 lakh on account of above revision. (Sr. No. a)
e. Cash Flow Statements
The cash flow from operating activities is determined by adjusting profit or loss for the period as against previously done by adjusting Total Comprehensive income for the year. Cash Flow statement changed on account of non-cash flow items previously not eliminated.
The components of Cash and Cash Equivalents are added as separate head below revised Cash Flow Statement.
f. 36 Contingent Liabilities and Commitments
Assessment demands raised by KVAT Authorities and adjusted against refunds due to the company amounting to Rs. 288.30 lakhs shown as Contingent Liability is removed from Contingent Liability and disclosed under Other Current Assets (Note no. 6b)
Assessment demands made and not adjusted against refund due to the company amounting to Rs. 73.36 lakh has been disclosed under Contingent Liability.
Current Year Contingent Liability is revised to Rs. 44798.31 lakhs from Rs. 45013.25 lakhs earlier.

 

For M. B. Agrawal & Co.
Chartered Accountants
(Firm's Registration No. 100137W)
sd/-
Harshal Agrawal
Place : Mumbai Partner
Date : 29-July-2019 (Membership No. 109438)

REPORT OF THE C&AG SUPPLEMENTARY AUDIT - STANDALONE FY 2018-19

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) OF THECOMPANIES ACT 2013 ON THE FINANCIAL STATEMENTS OF HINDUSTAN ORGANIC CHEMICALS LIMITEDFOR THE YEAR ENDED 31 MARCH 2019

The preparation of Financial Statements of Hindustan Organic Chemicals

Limited for the year ended 31 March 2019 in accordance with the financial reportingframework prescribed under the Companies Act 2013 (the Act) is the responsibility of themanagement of the Company. The Statutory Auditor appointed by the Comptroller and AuditorGeneral of India under Section 139(5) of the Act is responsible for expressing opinion onthe Financial Statements under Section 143 of the Act based on independent audit inaccordance with the standards on auditing prescribed under Section 143(10) of the Act.This is stated to have been done by them vide their Revised Audit Report dated 29 July2019 which supersedes their earlier Audit Report dated 28 May 2019.

I on behalf of the Comptroller and Auditor General of India have conducted aSupplementary Audit of the Financial Statements of Hindustan Organic Chemicals Limited forthe year ended 31 March 2019 under Section 143(6)(a) of the Act. This Supplementary Audithas been carried out independently without access to the working papers of the StatutoryAuditors and is limited primarily to inquiries of the Statutory Auditors and Companypersonnel and a selective examination of some of the accounting records.

In view of the revisions made in the Financial Statements by the management asindicated in Note No. 37B of the Financial Statements to give effect to some of my auditobservations raised during Supplementary Audit I have no further comments to offer uponor supplement to the Statutory Auditors' Report under Section 143(6)(b) of the Act.

For and on behalf of the

Comptroller and Auditor General of India

Sd/-

(Roop Rashi)

Director General of Commercial Audit and

Ex-officio Member Audit Board-I Mumbai.

Place: Mumbai

Date: 21 August 2019

.