To the Members of Indokem Limited
Report on the Audit of the Financial Statements Opinion
We have audited the financial statements of Indokem Limited ("the Company")which comprise the Balance Sheet as at March 31 2019 and the statement of Profit andLoss (including other comprehensive income) statement of changes in equity and statementof cash flows for the year then ended and notes to the financial statements including asummary of significant accounting policies and other explanatory information. In ouropinion and to the best of our information and according to the explanations given to usthe aforesaid financial statements give the information required by the Companies Act2013 ("the Act") in the manner so required and give a true and fair view inconformity with the Indian Accounting Standards prescribed under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended ("IndAS") and other accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2019 the loss and total comprehensive incomechanges in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the financial statements in accordance with the Standards onAuditing specified under section 143(10) of the Act (SAs). Our responsibilities underthose Standards are further described in the Auditor's Responsibilities for the Audit ofthe Financial 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 (ICAI) together with the independence requirements that are relevant to our audit ofthe financial statements under the provisions of the Act and the Rules made thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the ICAI's Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our audit opinion on thefinancial statements.
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 Migration to new IT Server and upgradation of the existing software during the year under review. ||We verified that the opening balances were correctly posted from the first system to the second. |
|It requires throrugh efforts to ensure proper control procedures were performed for data migration. ||We verified on test check basis the reliability of the data migrated and evaluated the design of internal control relating to the implementation of the new system and migration of data from the old system to the new. |
|2 Impairment testing of goodwill relating to acquisition of Capacitor business. Working of value in use involves a high degree of estimates and futuristic outlooks which are non comparable. ||We performed cut off procedures and verification of closing balances to ensure that complete and accurate data is migrated from the first new system to the second new system. |
| ||We performed overall data integrity and reliability procedures by collating the results from both the systems to cross verify that the closing results are reliable.Goodwill which was created in the earlier year. During amalgamation of Khatau. |
| ||Capacitor Private Limited with Indokem Limited thereby acquiring capacitor business is an item which requires high degree of estimate about working of the current value in use for determining the recoverable amount for the purpose of impairment testing. |
| ||We have verified the working as provided by the management and carried out testing of all the assumptions used in the working of the future cash flows and discount rate as well as growth rate for working out the terminal value in use compared with the past results to ensure that the recoverable amount is more than the carrying value of the Capacitors business including goodwill. |
|3 Status of contingent claims against the Company pending with high court. It involves high degree of uncertainty over the outcome of the case. ||We have obtained the status of the pending cases from the legal expert as hired by the Company. We have enquired regarding the proceedings in the court concerning the cases and the likely maximum liability if the verdict is unfavourable and whether the amount disclosed is appropriate. Disclosure relating to the contingent claim has been disclosed in Note 23 to the financial statement. |
|4 The Company has uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. ||We have obtained details of completed tax assessments and demands for the year ended March 31 2019 from management. |
| ||We also 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. |
| ||Disclosure relating to the uncertain tax positions has been disclosed in Note 23 to the financial statement. |
Information Other than the Financial Statements and Auditor's Report thereon
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 CorporateGovernance and Shareholder's Information but does not include the financial statementsand our auditor's report thereon. Our opinion on the financial express any form ofassurance conclusion thereon. In connection with our audit of the financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained during the course of our audit or otherwise appears to be materiallymisstated. 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.
When we read the above reports if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
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 financial statements that give a true and fair view of the financial financialperformance and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the accounting Standards specified under section133 of the Act. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement 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. The Board of Directors is also responsible foroverseeing the Company's financial reporting 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 financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence thatissufficientand appropriate |
|to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control. |
| Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the Company has adequate financial controls internal system in place and the operating effectiveness of such controls. |
| Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
| Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures financial statements or if such the disclosures are inadequate to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However future events or conditions may cause the Company to cease to continue as a going concern. |
| Evaluate the overall presentation structure and content of the financial statements including the disclosures and whether the financial statements represent the underlying transactions and events in a manner that achieves 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 chargedwith governance regarding among other matters the planned scope and timing of the auditand significant audit findings including any significant deficiencies in internal controlthat we identify during our audit. We also provide those charged with governance with astatement that we have complied with relevant ethical requirements regarding independenceand to communicate with them all relationships and other matters that may reasonably bethought to bear on our independence and where applicable related safeguards. From thematters communicated with those charged with governance we determine those matters thatwere of most significance in the audit of the financial statements of the current periodand are therefore the key audit matters. We describe these matters in our auditor's reportunless law or regulation precludes public disclosure about the matter or when inextremely rare circumstances we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication
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 mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
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 accounts as required by law have been kept by theCompany so far as it appears from our examination of those books.
c. The Balance Sheet the Statement of Profit and Loss and the Statement of Cashflowsdealt with by this Report are in agreement with the books of accounts.
d. In our opinion the aforesaid financial statements comply with the Indian AccountingStandards specified under Section 133 of the Act.
e. On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the Directors is disqualifiedas on March 31 2019 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".
g. With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended: In our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its Directors during the year is in accordance withthe provisions of section 197 of the Act.
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 Ind AS financial statements Refer Note 23 to the Ind AS financialstatements.
ii. The Company did not have any long-term contracts including derivative for whichthere were any material foreseeable losses.
iii. The Company is not required to transfer any amount to the investor Education andProtection Fund during the ended March 31 2019.
| ||For C N K & Associates LLP |
| ||Chartered Accountants |
| ||Firm Registration No.: 101961 W/ W - 100036 |
| ||Sd/- |
| ||Manish Sampat |
| ||Partner |
| ||Membership No.: 101684 |
|Place : Mumbai || |
|Date : May 13 2019 || |