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Indo Rama Synthetics (India) Ltd.

BSE: 500207 Sector: Industrials
NSE: INDORAMA ISIN Code: INE156A01020
BSE 15:45 | 17 Oct 26.30 0.45
(1.74%)
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25.90

HIGH

26.30

LOW

25.90

NSE 15:45 | 17 Oct 26.00 0
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OPEN

26.40

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26.65

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25.85

OPEN 25.90
PREVIOUS CLOSE 25.85
VOLUME 5600
52-Week high 40.95
52-Week low 15.65
P/E
Mkt Cap.(Rs cr) 687
Buy Price 25.95
Buy Qty 100.00
Sell Price 26.25
Sell Qty 500.00
OPEN 25.90
CLOSE 25.85
VOLUME 5600
52-Week high 40.95
52-Week low 15.65
P/E
Mkt Cap.(Rs cr) 687
Buy Price 25.95
Buy Qty 100.00
Sell Price 26.25
Sell Qty 500.00

Indo Rama Synthetics (India) Ltd. (INDORAMA) - Auditors Report

Company auditors report

To the Members of

Indo Rama Synthetics (India) Limited

1. Report on the Audit of the Ind AS Financial Statements

We have audited the accompanying Ind AS financial statements of Indo Rama Synthetics(India) Limited ("the Company") which comprise the Balance Sheet as at 31 March2018 the Statement of Profit and Loss the Statement of Changes in Equity and the CashFlow Statement for the year then ended and a summary of the significant accountingpolicies and other explanatory information.

2. Management's Responsibility for the Ind AS 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 Ind AS financial statements that give a true and fair view of the state of affairsprofit/loss and other comprehensive income changes in equity and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards (Ind AS) prescribed under section 133 of theAct.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

3. Auditor's Responsibility

Our responsibility is to express an opinion on these Ind AS financial statements basedon 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 of the Ind AS financial statements in accordance with theStandards on Auditing specified under Section 143(10) of the Act. Those Standards requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the Ind AS financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Ind AS financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of theInd AS financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal financial control relevant to the Company'spreparation of the Ind AS financial statements that give a true and fair view in order todesign audit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company's Directors as well as evaluating theoverall presentation of the Ind AS financial statements.

We are also responsible to conclude on the appropriateness of management's use of thegoing 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 entity's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in the auditor's report tothe related disclosures

in the financial statements or if such disclosures are inadequate to modify theopinion. Our conclusions are based on the audit evidence obtained up to the date of theauditor's report. However future events or conditions may cause an entity to cease tocontinue as a going concern.

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

4. Basis for Qualified Opinion

(i) Attention is drawn to note 41(a) of the Ind AS financial statements relating toDeferred Tax Assets amounting to ' 95.90 crores as at 31 March 2018 recognised by theCompany on the basis of future outlook of business confirming that sufficient futuretaxable income will be available against which these assets will be realised. In view oflosses suffered in the current as well as preceding periods and other unused tax lossesavailable to the Company we are not in agreement with the deferred tax assets recognised.Had such asset not been recognised the net loss after tax for the year ended 31 March2018 and 31 March 2017 would have been higher by ' 41.82 crores and ' 54.08 croresrespectively and other equity as at 31 March 2018 and 31 March 2017 would have been lowerby ' 95.90 crores and ' 54.08 crores respectively. The matter was subject to qualificationin the previous period as well.

(ii) Attention is drawn to note 39(b) of the Ind AS financial statements whichenumerates recognition of interest of ' 16.79 crores in the books by the Company on theinsurance claim recoverable from its insurance company for the loss of certain assets andloss suffered due to business interruption at its plant in 2007-08. The said recognitionof asset being contingent in nature is not in accordance with accounting principle statedin Ind AS 37 ‘Provisions Contingent Liabilities and Contingent Assets'. Had suchasset not been recognised the net loss before and after tax for the year ended 31 March2018 and 31 March 2017 would have been higher by ' 2.92 crores and ' 2.92 croresrespectively and other equity as at 31 March 2018 and 31 March 2017 would have been lowerby ' 16.79 crores and ' 13.87 crores respectively. The matter was subject to qualificationin the previous periods as well.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the matter described in the ‘Basis for Qualified Opinion'paragraph above the aforesaid Ind AS financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India including Ind AS of the state ofaffairs of the Company as at 31 March 2018 its loss other comprehensive income changesin equity and its cash flows for the year ended on that date.

6. Going Concern

We draw attention to note 41 of the Ind AS financial statements which indicates thatthe Company has incurred a net loss before tax of ' 124.86 crores during the year ended 31March 2018 and as of that date the Company's current liabilities exceeded its currentassets. Based on and as fully explained by the management in note 41 of the Ind ASfinancial statements on the initiatives taken we believe the Company shall be able tocontinue as a going concern.

7. Emphasis of matter

We draw an attention to note 39(a) of the Ind AS financial statements which describesthe uncertainty related to the outcome of the lawsuit filed by the Company against aninsurance company.

Our opinion is not modified in respect of this matter.

8. Report on Other Legal and Regulatory Requirements

(i) As required by the Companies (Auditor's Report) Order 2016 (‘the Order')issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure I" a statement on the matters specified in paragraphs 3 and 4 of theOrder.

(ii) 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. Except for the effects of the matter described in the ‘Basis for QualifiedOpinion' paragraph above in our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;

c. The Balance Sheet the Statement of Profit and Loss the Cash Flow Statement andStatement of Changes in Equity dealt with by this Report are in agreement with the booksof account;

d. Except for the effects of the matter described in the ‘Basis for QualifiedOpinion' paragraph in our opinion the aforesaid Ind AS financial statements comply withthe Indian Accounting Standards prescribed under Section 133 of the Act;

e. The matter described in the ‘Basis for Qualified Opinion' ‘Going concern'and ‘Emphasis of matter' paragraph above in our opinion may have an adverse effecton the functioning of the Company;

f. On the basis of the written representations received from the directors as on 31March 2018 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2018 from being appointed as a director in terms of Section164 (2) of the Act;

g. The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the ‘Basis for Qualified Opinion' paragraphabove;

h. 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 II";

i. 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 Ind AS financial statements - Refer notes 37 and 39 to the Ind ASfinancial statements;

(ii) The Company did not have any long-term contracts including derivative contractsoutstanding as at 31 March 2018 for which there were any material foreseeable losses;

(iii) There has been no delay in transferring amounts that were required to betransferred to the Investor Education and Protection Fund by the Company; and

(iv) The disclosure in the financial statements regarding holdings as well as dealingsin Specified Bank Notes during the period from 8 November 2016 to 30 December 2016 havenot been made since they do not pertain to the financial year ended 31 March 2018.However amounts as appearing in the audited financial statements for the year ended 31March 2017 have been disclosed - Refer note 36 to the Ind AS financial statements.

For B S R and Associates

Chartered Accountants ICAI Firm Registration Number: 128901W

Jiten Chopra
Place: Gurugram Partner
Date: 28 May 2018 Membership No.: 092894

(i) (a) According to the information and explanations given to us the Company hasmaintained proper records showing full particulars including quantitative details andsituation of fixed assets (property plant and equipment and intangible assets).

(b) According to the information and explanations given to us the fixed assets arephysically verified by the management in accordance with a phased programme designed tocover all items of fixed assets over a period of three years which in our opinion isreasonable having regard to the size of the Company and nature of its fixed assets. Inaccordance with this programme certain categories of fixed assets at certain locationshave been physically verified by the management during the year. As informed to us nomaterial discrepancies were observed on such verification.

(c) According the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of the immovable properties areheld in the name of the Company.

(ii) According to the information and explanations given to us the inventories exceptfor goods in transit and stocks with third parties have been physically verified atreasonable interval by the management during the year. For stocks lying with third partiesat the year end written confirmations are obtained. As informed to us no materialdiscrepancies were noticed on such verification.

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register required under section 189 of theCompanies Act 2013 (‘the Act'). Accordingly paragraph 3(iii) of the Order is notapplicable.

(iv) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company there are no loans investments guaranteesand security where provisions of section 185 and 186 ofthe Act are required to be compliedwith. Accordingly the provisions of paragraph 3(iv) of the Order is not applicable.

(v) According to the information and explanations given to us the Company has notaccepted any deposits covered under section 73 to 76 of the Act. Accordingly theprovisions of paragraph 3(v) of the Order is not applicable.

(vi) We have broadly reviewed the books of account maintained by the Company in respectof products where pursuant to the rules made by the Central Government the maintenanceof cost records has been prescribed under sub section (1) of section 148 of the CompaniesAct 2013 and are of the opinion that prima facie the prescribed accounts and recordshave been made and maintained. However we have not made a detailed examination of suchrecords with a view to determine whether they are accurate or complete.

(vii) (a) According to the information and explanationsgiven 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 Income tax Sales tax Servicetax Duty of Customs Duty of Excise Value Added Tax Cess and any other materialstatutory dues to the extent applicable have generally been regularly deposited with theappropriate authorities except dues related to Provident Fund Employees' State InsuranceTax Deducted at Source and Goods and Service Tax which have not generally been regularlydeposited with the appropriate authorities and there has been significant delays duringthe year.

According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees' State Insurance Income tax GST Salestax Service tax Duty of Customs Duty of Excise Value Added tax Cess and othermaterial statutory dues to the extent applicable were in arrears as at 31 March 2018 fora period of more than six months from the date they became payable.

(b) According to the information and explanations given to us and on the basis of therecords of the Company examined by us there are no dues of Income tax Sales tax Servicetax Duty of Customs Duty of Excise and Value Added Tax which have not been depositedwith the appropriate authorities on account of any dispute except as mentioned below:

Name of the statute Nature of dues Amount of dispute (' Crores) # Amount paid under protest (' Crores) Period to which it relates Forum where dispute is pending
The Central Excise Act Duty of 1.06

-

2002-03 Bombay High Court Nagpur
1944 Excise 5.70 2.50 2003-04 to 2005-06 Bench
0.51 - March 2008- December 2010
59.34 5.90 1996- 97 and 200102 to 2009-10 Customs Excise and Service Tax Appellate Tribunal
29.44 1996-97 to 2002-03 2004-05 to 2008-09 and 2011-12 to 2015-16 Commissioner of Central Excise and Customs (Appeals)
6.66 0.05 1997-98 to 2012-13 Commissioner/ Assistant Commissioner/ Deputy Commissioner
Bombay Sales Tax Act1959/ Central Sales Tax Act 1956 Sales Tax 0.43 0.13 1998-99 to 1999-00 Joint Commissioner Sales Tax (Appeals) Nagpur
Maharashtra Value Added Tax Act 2002 Value Added Tax 17.59 5.60 2008-09 to 2013-14
Customs Act 1962 Duty of 214.25 - 2006-07 Supreme Court
Customs 3.67 0.13 2014-15 and 2015-16 Customs Excise and Service Tax Appellate Tribunal
6.01 - 2006-07 Commissioner of Customs
0.04 - 1997- 98 to 1998-99 Assistant Commissioner/ Deputy Commissioner
Finance Act 1994 Service Tax 0.22 0.08 2004-05 to 2009-10 Customs Excise and Service Tax Appellate Tribunal
0.22

-

2002-03 to 2005-06 Commissioner Nagpur
0.93 0.01 2007-08 2010-11 to 2013-14 Commissioner (Appeals) Nagpur
0.31 1997-98 2000-01 and 2010-11 to 2014-15 Assistant/ Deputy Commissioner Nagpur
Income tax Act 1961 * Income Tax 0.26 0.26 AY 2006-07 Commissioner of Income Tax (Appeals)
0.33 - AY 2017-18 Commissioner of Income Tax (Appeals)

*excluding cases where losses/unabsorbed depreciation have been adjusted by the taxauthorities without raising any demands though disputed by the Company.

# including interest/penalties where quantified and demanded by authorities.

(viii) According to the information and explanations given to us the Company has notdefaulted in the payment of loans or borrowing to the banks except for delays in therepayment of term loans and dues (cash credit accounts) to banks. Details of delays andamount in default outstanding as at 31 March 2018 are given below:

Bank Name Nature of loan Total amount delayed (' Crores) No of days Amount outstanding as at 31 March 2018 (' Crores)
Cash Credit
Bank of India 549.15 1 to 56 days 141.00
HDFC Bank 155.46 1 to 77 days -
Punjab National Bank Overdue 154.68 1 to 65 days 26.58
State Bank of India 385.52 1 to 66 days 0.72
Oriental Bank of Commerce 271.67 1 to 84 days 17.76
Axis Bank 148.41 1 to 72 days 5.07
Term Loan
Bank of India 10.00 1 to 37 days -
State Bank of India Overdue 5.62 1 to 58 days -
IKB Deutsche Bank 26.62 1 to 530 days 26.62

Further there are no loans or borrowings from financial institutions or government andthere are no dues to debenture holders during the year.

(ix) According to the information and explanations given to us the term loan taken bythe Company have been applied for the purposes for which they were raised. The Company hasnot raised any moneys by way of initial public offer or further public offer.

(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 on the basis of ourexamination of the records of the Company the managerial remuneration has been paid/provided in accordance with the provisions of section 197 read with Schedule V to theCompanies Act 2013 except ' 0.97 crores which had been paid as Managerial Remuneration bythe Company to one of its directors for services rendered in excess of the amount approvedby the Central Government vide approval SRN G02817724/2016-CL.VII respectively. TheCompany is awaiting approval of its submission filed under relevant rules.

(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 is notapplicable.

(xiii) According to information and explanations given to us and on the basis of ourexamination of the records of the Company all transactions with the related parties arein compliance with section 177 and 188 of the Act where applicable and the details havebeen disclosed in the standalone Ind AS financial statements as required by theapplicable accounting standards.

(xiv) According to information and explanations given to us the Company has not madeany preferential allotment or private placement of shares or fully or partly convertibledebentures during the year. Accordingly the provisions of paragraph 3(xiv) of the Orderis not applicable.

(xv) According to information and explanations given to us the Company has not enteredinto any non-cash transactions with directors or persons connected with him. Accordinglythe provisions of paragraph 3(xv) of the Order is not applicable.

(xvi) According to 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.

For B S R and Associates

Chartered Accountants ICAI Firm Registration Number: 128901W

Jiten Chopra
Place: Gurugram Partner
Date: 28 May 2018 Membership No.: 092894

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls with reference to financial statementsof Indo Rama Synthetics (India) Limited ("the Company") as of 31 March 2018 inconjunction with our audit of the Ind AS financial statements of the Company for the yearended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control with reference to financial statementscriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on ‘Audit of Internal Financial Controls overFinancial Reporting' issued by the Institute of Chartered Accountants of India(‘ICAI'). These responsibilities include the design implementation and maintenanceof adequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding 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 under the Act.

Auditor's 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 on ‘Audit of Internal Financial Controls OverFinancial Reporting' (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the Act 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 withreference to financial statements was established and maintained and if such controlsoperated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemwith reference to financial statements.

Meaning of Internal Financial Controls with reference to Financial Statements

A company's internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialstatements and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control withreference to financial statements includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures 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.

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 control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference tofinancial statements and such internalfinancial controls with reference to financial statements were operating effectively as at31 March 2018 based on the internal control over financial statements criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note issued by the ICAI.

For B S R and Associates

Chartered Accountants ICAI Firm Registration Number: 128901W

Jiten Chopra
Place: Gurugram Partner
Date: 28 May 2018 Membership No.: 092894