The Members of Kakatiya Cement Sugar and IndustriesLimited
Report on the Audit of the Financial Statements
We have audited thefinancial statements ofKakatiya Cement Sugar and IndustriesLimited ("the
Company") which comprise the Balance Sheet as at 31st March 2020 the Statementof Profit and Loss
(including Other Comprehensive Income) the Statement of Changes in Equity andStatement of Cash
Flows for theyearthenendedand significantaccounting policies and otherexplanatory summaryof information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the themanner so required and give a true and fair view in conformity with the [Indian AccountingStandards prescribed under section 133 of the Act read with the Companies (IndianAccounting Standards) Rules 2015 as amended ("Ind AS") and other accountingprinciples generally accepted in India of the state of affairs of the Company as at 31stMarch 2020 and its Loss total comprehensive income its cash flows and thechanges in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the financial statement in accordance with the Standards onAuditing (SAs) specified under section 143(10) of the Companies Act 2013. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India together with the ethical requirements that are relevantto our audit of the financial statements under the provisions of the Companies Act 2013and the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our opinionon the financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgement 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.
We have determined the matters described below to be the key audit matters in our auditof the Company for the year ended 31st March 2020.
|Sr. No. Key Audit Matter ||Auditor's Response |
|1 Provision for Wheeling Charges ||Principal Audit Procedures |
|Adequacy of the estimated provision made for wheeling charges for the energy generated at bagasse based cogen plant to the cement plant as per the orders of the Hon'ble Supreme Court of India. Refer Note 31(x) of the financial statements. ||We have performed the following audit procedures: |
|Given the significance of the matter there is a risk that provision made for wheeling charges could significantly vary from what is being estimated. ||? Reviewed the wheeling agreement entered by the Company with Electricity Companies. |
| ||? Reviewed the wheeling charges tariff orders of State Electricity Regulatory Commission. |
| ||? Verified the workings such as number of units generated by the bagasse based cogenwheeling charges tariff considered etc. in the respective years. |
| ||Verified the adequate disclosures made as per Ind AS 1 and Schedule III of the Companies Act 2013 |
|2 Evaluation of uncertain tax positions The Company has material uncertain tax positions including matters under dispute which involves significant determine the possible outcome of these disputes. ||Principal Audit Procedures |
|Refer Notes 31 to the Financial Statements ||? Obtained details of completed tax assessments and demands for the year ended 31st March 2020 from management. |
| ||We involved our internal experts to challenge the management's underlying assumptions in estimating the tax provision and the possible outcome of the disputes. |
| ||? Our internal experts 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 2019 to evaluate whether any change was required to management's position on these uncertainties. |
|3 Net Realizable Value of Finished Goods || |
Principal Audit Procedures
|Finished goods inventory are valued at lower of cost and net realizable value (estimated selling price less estimated cost to sell). Considering that there is always volatility in the selling price of sugar which is dependent upon various market conditions determinationof the net realizable value involves significant management judgement and therefore has been considered as a key audit matter. ||? Obtained an understanding of the determination of the net realizable values of the commodities and assessed and tested the reasonableness of the significant judgements applied by the management. |
|The total value of finished goods of sugaras at 31stMarch 2020 is Rs.3104.75lakhs. ||? Evaluated the design of internal controls relating to the valuation of finished goods (including commodities) and also tested the operatingeffectiveness of the aforesaid controls. |
| ||? Compared the actual realization after the year end / latest realization to assess the reasonableness of the net realisable value that was estimated and considered by the management. |
| ||? Compared the actual costs incurred to sell after the year end / based on the latest sale transaction to assess the reasonableness of the cost to sell that was estimated and considered by the management. |
| ||? Compared the cost of the finished goods with the estimated net realisable value and checked if the finished goods were recorded at net realisable value where the cost was higher than the net realisable value. |
| ||? Assessed the appropriateness of the disclosure in the financialstatements in accordance with the applicable financial reporting framework. |
Information Other than the Financial Statements(Other Information)
The Company's Board of Directors are responsible for the other information. The otherinformation comprises the information included in the Board's Report ManagementDiscussion & Analysis and Report on Corporate Governance but does not include thefinancial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identfied above when it becomes available and in doing so considerwhether the other information is materially inconsistent with the financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated.
When we read the Directors Report and Corporate Governance Report if we conclude thatthere is a material misstatement therein we are required to communicate the matter tothose charged with governance.
Management's Responsibility for the 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 ofthesefinancial statements that give a true and fair view of the financialpositionfinancial performance total comprehensive and cash flows of the Company in accordancewith accounting principles generally accepted in India including the Indian AccountingStandards specifiedunder section 133 of the Act. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the
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 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.
The 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 thesefinancial 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 statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theCompanies Act 2013 we are also responsible for expressing our opinion on whether thecompany has adequate internal fectiveness of such controls.ef financial controls systeminplace andthe operating
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
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 the Company's ability to continue asorconditionsthatmaycastsignificant a going concern.If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in thefinancial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and financialstatements including contentof the the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
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 financial statements of theyear ended 31 st March 2020 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
(c) The Balance Sheet the Statement of Profit and Loss Statement of Changes in Equityand the Cash Flow Statement dealt with by this Report are in agreement with the books ofaccount.
(d) In our opinion the aforesaid financial statements comply with the IndianAccounting Standards prescribed under Section 133 of the Act read with Rule 7 of Companies(Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 st March 2020 from being appointed as a director interms of Section 164 (2) of the Act.
(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 A".
(g) With respect to other matters to be included in the Auditor's Report in accordancewith the requirements of section 197(16) of the Act as amended in our opinion and to thebest of our information and according to the explanations given to us the remunerationpaid by the Company to its directors during the year is in accordance with the provisionsof 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 wefurther report that:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements(Refer note 31);
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
2. 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 B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
|For Ramanatham & Rao |
|Chartered Accountants |
|(FRN: S-2934) |
|C. Kameshwar Rao |
|Membership No.024363 |
Place: Hyderabad Date: 24th June 2020
Annexure "A" to the Independent Auditor's Report
(Referred to in paragraph 1(f) under Report on Other Legal RegulatoryRequirements' section of our report to the Members of the Companyon the financialstatements for the year ended 31st March 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 KakatiyaCement Sugar and Industries Limited ("the Company") as of 31st March 2020 inconjunction with our audit of the financial statements of the Company for the year endedon 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 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 Reporting issued by the Institute of Chartered Accountants ofIndia (ICAI'). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the CompaniesAct 2013.
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 deemed to be prescribed under section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls both applicable to an audit of Internal Financial Controls and bothissued by the Institute of Chartered Accountants of India. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively 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 financial statements 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 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 for externalpurposes in accordance with generally accepted accounting principles. A company's internalfinancial control over financial reporting includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation ofInd AS financial statements in 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 Ind AS financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
financial reporting including the Becauseoftheinherentlimitations of internalfinancial possibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financialreporting to futureperiods are subject to the risk that the internal financial control over financialreporting may become inadequate because compliance with the policies or procedures maydeteriorate.
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 31 st March 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial
Controls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
|For Ramanatham & Rao |
|Chartered Accountants |
|(FRN: S-2934) |
|C. Kameshwar Rao |
|Membership No.024363 |
Place: Hyderabad Date: 24th June 2020
Annexure "B" to the Independent Auditor's Report
With reference to Paragraph 2 under Report on Other Legal RegulatoryRequirements' section of our report to the Members of the Company on thefinancialstatements for the year ended 31 st March 2020 we report that -
(i) (a) The Company is in the process of updating proper records showing fullparticulars including quantitative details and situation of fixed assets.
(b) As explained to us the fixed assets have been physically verified by themanagement in a periodical manner which in our opinion is reasonable having regard tothe size of the Company and the nature of its business. No material discrepancies werenoticed on such physical verification.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.
(ii) The inventories have been physically verified during the year by themanagement.The discrepancies noticed on verification between the physical stocks and bookrecords were not material.
(iii) The company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Act. Accordingly paragraph 3 (iii) (a) to (c) of the said Order is notapplicable to the
(iv) 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 loans investments guarantees and securities made.
(v) The company has not accepted deposits within the meaning of Sections 73 to 76 ofthe Act and the rules framed there under paragraph 3 (v) of the said Order is notapplicable to the
(vi) We have broadly reviewed the cost records maintained by the Company as prescribedunder sub-section (1) of section 148 of the Act and are of the opinion that prima faciethe prescribed accounts and records have been made and maintained.
(vii) (a) According to the information and explanations given to us and the records ofthe
Company examined by us the Company is regular in depositing undisputed statutory duesincluding provident fund employees' state insurance income-tax goods and service taxand any other statutory dues as applicable with the appropriate authorities and there wereno arrears of outstanding statutory dues as at the last day of the financial yearconcerned for a period of more than six months from the date they became payable.
(b) According to the information and explanations given to us and records of theCompany examined by us the particulars of income tax value added Tax customs dutyas at31st March 2020 which have not been deposited on account of any disputepending are as under:
|Name of the Statute ||Nature of dues ||Amount (Rs.in Lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|Income-Tax Act 1961 ||Income Tax ||12.42 ||Assessment Years 1999-2000 ||High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh |
| || || ||2000-2001 || |
| || || ||2001-2002 || |
|Income-Tax Act 1961 ||Income Tax ||969.26 ||Assessment Year 2016-2017 ||ITAT Hyderabad |
|VAT Act 2005 ||Sales Tax ||29.53 ||Financial Year 2012-13 ||Appellate Tribunal Hyderabad |
|VAT Act 2005 ||Sales Tax ||27.52 ||Financial Year 2013-14 ||Appellate Tribunal Hyderabad |
|VAT Act 2005 ||Sales Tax ||173.33 ||Financial Year 2014-15 ||Additional Joint Commissioner Hyderabad |
|Customs Act 1962 ||Customs Duty ||65.77 ||Financial year 2012-2013 ||Additional Commissioner Customs |
(viii) The Company has not defaulted in repayment of loans or borrowing to a financialinstitution banks Governments and dues to debenture holders.
(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer during the year. In our opinion and according to the information andexplanations given to us the term loans have been applied for the purpose for which theloans were obtained other than amounts temporarily invested pending utilization of thefunds for the intended use.
(x) To the best of our knowledge and belief and according to the information and us nofraud on or by the Company was noticed or reported during the year.
(xi) According to the information and explanations give to us of the Company theCompany has paid/provided for managerial remuneration the requisite approvals mandated bythe provisions of section 197 read with Schedule V to the Act.
(xii) 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.
(xiii) According to the information and explanations records of the Companytransactions with the related parties are in compliance with section177 and 188 of the Actwhere applicable and details of such transactionshave been disclosed in the financialstatements as required by the applicable accounting standards.
(xiv) According to the information and explanations give 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. Accordingly paragraph 3 (xiv) of the Order is not applicable.
(xv) 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 any non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3 (xv)of the Order is not applicable to the Company.
(xvi) The Company is not required to be registered under section45-IA of the ReserveBank of India Act 1934. Accordingly paragraph 3 (xv) of the Order is not applicable tothe Company.
|For Ramanatham & Rao |
|Chartered Accountants |
|C.Kameshwar Rao |
|Membership No.024363 |
Place: Hyderabad Date: 24thJune 2020