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Indoco Remedies Ltd.

BSE: 532612 Sector: Health care
NSE: INDOCO ISIN Code: INE873D01024
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OPEN 446.50
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VOLUME 285
52-Week high 495.00
52-Week low 201.20
P/E 43.96
Mkt Cap.(Rs cr) 4,063
Buy Price 440.70
Buy Qty 1.00
Sell Price 441.40
Sell Qty 1.00
OPEN 446.50
CLOSE 441.85
VOLUME 285
52-Week high 495.00
52-Week low 201.20
P/E 43.96
Mkt Cap.(Rs cr) 4,063
Buy Price 440.70
Buy Qty 1.00
Sell Price 441.40
Sell Qty 1.00

Indoco Remedies Ltd. (INDOCO) - Auditors Report

Company auditors report

To the Members of Indoco Remedies Limited

Report on the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying standalone Ind AS financial statements of IndocoRemedies Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2020 and the Statement of Profit and Loss including Other Comprehensive IncomeCash Flow Statement and the Statement of Changes in Equity for the year then ended and asummary of significant accounting policies and other explanatory information (‘thestandalone Ind AS financial statements').

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 Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with Indian Accounting Standards prescribed undersection 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015as amended ("Ind AS") and the other accounting principles generally accepted inIndia of the state of affairs of the Company as at March 31 2020 and its profit andother comprehensive loss changes in equity and its cash flows for the year ended on thatdate.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the standalone Ind ASfinancial 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 Act and the Rules thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theCode of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate 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 standalone Ind AS financial statements of the currentperiod. These matters were addressed in the context of our audit of standalone Ind ASfinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our audit report.

Sr. No. Key Audit Matters Auditor's Response
1 Intangible assets under development. We have carried out the validation of the information provided by the management by performing the following procedures:
The Company undertakes several projects for new product development. Once the regulatory approvals are received such items are reclassified as Intangible Assets in the books of accounts.
a) Obtaining detailed listing of all projects under development.
The management makes an assessment as to whether all such projects are capable of being completed and capable of getting the requisite regulatory approvals. On the basis of such assessment the costs incurred on such projects till the time regulatory approvals are obtained are reflected in the financial statements as "Intangible assets under development". The quantum of Intangible Assets Under Development as at March 31 2020 was Rs 4337.90 lakhs. b) Evaluating management's judgement of technical and commercial feasibility of such projects and comparing the same with past record of such regulatory approvals.
c) Getting representations from the management wherever necessary.
Refer Note no. 5 to the Standalone Financial Statements.
2 Accuracy Completeness and disclosure with reference to Ind AS-16 of Property Plant and Equipment (including Capital Work in Progress) Our audit procedures amongst others include the following –
a) Obtaining an understanding of operating effectiveness of management's internal control over capital expenditure.
The carrying value of property plant and equipment (including capital work in progress) as on 31.03.2020 of Rs 54364.74 lakhs includes Rs 16739.95 lakhs capitalised /transferred from capital work in progress during the year. Capital expenditure involves management technical estimates and judgement about capitalisation estimated useful life impairment which has material impact on balance sheet and operating results of the Company. b) We assessed Company's process regarding maintenance of records valuation and accounting of transactions pertaining to Property Plant and Equipment including Capital Work in Progress with reference to Indian Accounting Standard 16: Property Plant and Equipment.
Refer Note no. 3 to the Standalone Ind AS Financial Statements. c) We have reviewed management judgment pertaining to estimation of useful life and depreciation of the Property Plant and Equipment.
d) We have verified the capitalization of borrowing cost incurred on qualifying asset in accordance with the Indian Accounting Standard 23: Borrowing Costs.
e) Ensuring adequacy of disclosures in the standalone financial statements.
3 Provisions for Sales Returns.
We have carried out the validation of the information provided by the management by performing the following procedures:
The Company provides for sales returns on an estimated basis as a percentage of sales. Such an estimate is arrived at on the basis of average of actual sales return over the last 3 financial years. Such estimation is based on management best judgement of the probability of sales returns. Provision for sales return amounted to Rs 2872.52 lakhs as on March 31 2020. a) Validating the process consistently implemented by the management in arriving at the estimates.
b) Correlating the amounts of actual sales returns with the provisions made.
Refer Note no. 27 to the Standalone Financial Statements. c) Evaluated management assessment for change in estimates for provision for sales return during this year.
d) Getting representations from the management wherever necessary.

Information Other than the Standalone Ind AS Financial Statements and Auditor's ReportThereon

The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the standalone Ind AS financial statements and our auditor's report thereon.

Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone Ind AS financialstatements or our knowledge obtained during the course of our audit or otherwise appearsto be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Responsibilities of the Management and those charged with governance for the StandaloneFinancial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone Ind AS financialstatements that give a true and fair view of the financial position financialperformance changes in equity and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate implementationand maintenance of accounting policies; making judgments and estimates that are reasonableand prudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalone IndAS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

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

Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Standards on Auditing we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

a) Identify and assess the risks of material misstatement of the standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

b) Obtain an understanding of internal controls relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under the section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.

c) Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

d) Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the ability ofthe Company to continue as a going concern. If we conclude that a material uncertaintyexists we are required to draw attention in our auditor's report to the relateddisclosures in the standalone Ind AS financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.

e) Evaluate the overall presentation structure and content of the standalone Ind ASfinancial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.

Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

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

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone Ind AS financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of Section 143 ofthe Act we give in the Annexure A a statement on the matters specified in paragraphs 3and 4 of the Order.

2. As required by Section 143(3) of the Act we report that:

a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.

b) in our opinion proper books of account as required by law have been kept by theCompany so far as 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) in our opinion the aforesaid standalone Ind AS financial statements comply with theIndian Accounting Standards specified under Section 133 of the Act read with relevantrules issued there under.

e) on the basis of written representations received from the directors as on March 312020 taken on record by the Board of Directors none of the directors is disqualified ason March 31 2020 from being appointed as a director in terms of Section 164(2) of theAct.

f) 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 B"; and

g) 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 standalone Ind AS financial statements – Refer note 46 to thestandalone Ind AS financial statements.

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.

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

3. As required by Section 197(16) of the Act in our opinion and to the best of ourinformation and according to the explanations given to us the remuneration paid by theCompany to its directors during the year is in accordance with the provisions of section197 of the Act.

For Gokhale & Sathe
Chartered Accountants
Firm Regn. No. 103264W
Tejas Parikh
Partner
Date : June 24 2020 Membership No. 123215
Place : Mumbai UDIN:- 20123215AAAABR4616

ANNEXURE A

To the Independent Auditors' Report as required by the Companies (Auditor's Report)order 2016

(Referred to in our Report of even date on financial statements of Indoco RemediesLimited as at March 31 2020)

As required by the Companies (Auditor's Report) Order 2016 issued by the CentralGovernment in terms of Section 143(11) of the Companies Act 2013 on the basis of thechecks as we considered appropriate we report on the matters specified in paragraph 3 and4 of the said order to the extent applicable to the company:

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

(b) As explained to us the company has a regular programme of physical verification offixed assets by the management so as to cover all the fixed assets over a period of fiveyears which in our opinion is reasonable having regard to the size of the Company and thenature of its assets.

Pursuant to the programme certain fixed assets were physically verified during theyear and no material discrepancies were noticed on such verification.

(c) According to the information and explanations provided to us and on the basis ofour examination of the records of the Company the title deeds of immovable properties areheld in the name of the Company. In respect of immovable properties which have been takenon lease and disclosed as property plant and equipment in the standalone Ind AS financialstatements the lease agreements are in the name of the Company.

2. In our opinion and according to the information and explanations provided to us theinventories have been physically verified by the management during the year. In ouropinion the frequency of such verification is reasonable. In our opinion and as explainedto us there were no material discrepancies noticed on physical verification ofinventories as compared with the books of account.

3. 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 maintained under Section 189 of theAct. Accordingly the provisions of clause 3(iii) (a) (b) and (c) of the Order are notapplicable to the Company.

4. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Act with respectto the loans and investments made wherever applicable.

5. In our opinion and according to the information and explanation given to us theCompany has not accepted any deposits from the public within the meaning of the directivesissued by the Reserve Bank of India provisions of Section 73 to 76 of the Act any otherrelevant provisions of the Act and the relevant rules framed thereunder.

6. We have broadly reviewed the cost records maintained by the Company pursuant to theCompanies (Cost Records and Audit) Rules 2014 prescribed by the Central Government underSection 148(1) (d) of the Companies Act 2013 and are of the opinion that prima faciethe prescribed accounts and cost records have been maintained. We have however not madea detailed examination of the cost records with a view to determine whether they areaccurate or complete.

7. (a) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company amounts deducted / accrued in the books ofaccount in respect of undisputed statutory dues including Provident Fund Employees StateInsurance Income tax Sales tax GST Custom duty and any other material statutory dueshave been regularly deposited during the year with the appropriate authorities. Accordingto the information and explanations given to us no undisputed amounts payable in respectof the aforesaid dues were in arrears as at 31st March 2020 for a period of morethan six months from the date they became payable.

(b) According to the information and explanation given to us there are no dues ofcustoms duty and service tax that have not been deposited on account of any dispute.However according to the information and explanation given to us the following dues ofincome tax central excise and sales tax have not been deposited by the Company on accountof disputes:

Nature of Statue Nature of Dues

Amount

Period to which amount relates

Forum where dispute is pending

(` in Lakhs)

Telangana VAT Act 2005 T Vat 309.59 2009-14 Telangana VAT & Sales Tax Appellate Tribunal Hyderabad
Telangana VAT Act 2005 T Vat 114.69 2008-18 Appellate Deputy Commissioner (CT) Hyderabad Rural Division
Telangana VAT Act 2005 and Central Sales Tax Act 1956 T Vat 5.99 2013–18 Deputy Commissioner (CT) Saroornagar Division Hyderabad
Andhra Pradesh VAT Act 2005 A Vat 94.90 2005-09 High Court Hyderabad
Andhra Pradesh VAT Act 2005 A Vat 19.35 2014-16 Appellate Deputy Commissioner (CT) Vijaywada
Goa VAT Act 2005 G Vat 20.21 2007-08 & 2009-10 Asst. Commissioner Tax Officer Margao
Central Excise Act 1944 Excise Duty 14.12 1997-98 various years Honourable Supreme Court
Central Excise Act 1944 Excise Duty 85.88 1995-96 1997-98 & 2010-14 CESTAT Mumbai
Central Excise Act 1944 Excise Duty 5.83 1997-99 Divisional Dy. Commissioner
Finance Act 1994 Service Tax 586.39 2006-08 CESTAT Mumbai

8. In our opinion and according to the information and explanations given to us theCompany has not defaulted in repayment of dues to banks and financial institutions. TheCompany has not taken any loans or borrowings from Government and has not issueddebentures during the year.

9. In our opinion and according to the information and explanations given to us theCompany has raised term loans and the term loans so raised have been applied for thepurpose for which these were obtained. The Company did not raise any money by way ofinitial public offer or further public offer (including debt instruments) during the yearunder audit.

10. According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.

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

12. In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.

13. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with Sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the standalone Ind AS financial statements as requiredby the applicable accounting standards.

14. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.

15. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.

16. According to the information and explanations given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.

For Gokhale & Sathe
Chartered Accountants
Firm Regn. No. 103264W
Tejas Parikh
Partner
Date : June 24 2020 Membership No. 123215
Place : Mumbai UDIN:- 20123215AAAABR4616

ANNEXURE - B

to the Independent Auditors' Report as required by Sec. 143(3) of Companies Act 2013

(Referred to in our Report of even date on standalone Ind AS financial statements ofIndoco Remedies Limited as at March 31 2020)

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 over financial reporting of IndocoRemedies Limited ("the Company") as of March 31 2020 in conjunction with ouraudit of the Standalone Ind AS financial statements of the Company for the year ended onthat 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 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

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 Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls 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 judgment including the assessment of the risks ofmaterial misstatement of the standalone Ind AS financial statements whether due to fraudor 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 systemover financial reporting.

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 of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Company;

2. 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 authorisations of management and directors of the Company; and

3. provide reasonable assurance regarding prevention or timely detection ofunauthorised 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

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 the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at March 31 2020 basedon the internal control over financial reporting criteria established by the Companyconsidering 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.

For Gokhale & Sathe
Chartered Accountants
Firm Regn. No. 103264W
Tejas Parikh
Partner
Date : June 24 2020 Membership No. 123215
Place : Mumbai UDIN:- 20123215AAAABR4616

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