Report on the Audit of the Standalone Financial Statements
We have audited the accompanying Standalone Financial Statements of Kaveri SeedCompany Limited ("the Company") which comprise the Balance Sheet as at 31March 2020 the Statement of Profit and Loss the Statement of Changes in Equity and theStatement of Cash Flows for the year then ended and notes to the standalone financialstatements including a summary of the significant accounting policies and otherexplanatory information (here after referred to as "the standalone financialstatements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at 31 March 2020 the profit (including othercomprehensive income) changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the "Auditor'sResponsibilities for the Audit of the Standalone Financial Statements" section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the ethicalrequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto 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 financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|S. No. Key Audit Matter ||Auditor's Response |
|1 Revenue: Management estimate of provision for sales return and Discount & schemes: ||Principal Audit Procedures: |
| ||We have performed the following principal audit procedures in relation to revenue recognised: |
|Estimate for sales returns and discounts and schemes was a critical audit matter in the audit of the Company's financial statements for the year ended 31 March 2020. || Assessing the appropriateness of the Company's revenue recognition accounting policies in line with Ind AS 115 ("Revenue from Contracts with Customers"). |
|Management estimates the amount of returns expected based on the goods returned in the past and current market demands. || Understanding and Testing of design and operating effectiveness of Internal controls in place relating to recognition and measurement of sales returns and discount amounts |
|The management considers revenue as key measure for evaluation of performance. || Testing of relevant information technology general controls automated controls and the related information used in recording and disclosing revenue. |
|Refer Note 2.1 2.10 13 28 and 29 to the Standalone Financial Statements || Substantive testing of sales returns and discounts with the underlying documents. |
| || Testing of supporting documentation for sales return transactions recorded during the period closer to the year end and subsequent to year end including examination of credit notes issued after the year end to determine whether the returns were recognised in the correct accounting period. |
| || Performing analytical procedures on current year revenue based on seasonal trends and where appropriate conducting further enquiries and testing. |
| || Evaluating historical accuracy of estimates made by management in respect of sales return by performing trend analysis and comparing them with actuals. |
|2 Valuation and classification of Investments: Company has Investments in Mutual funds Real estate fund and other equity instruments. ||Principal Audit Procedures: |
|The Company holds significant amount of funds in the form of investments. Also considering the complexities involved in classification of investments the Company considers investments as material account balance. ||We focused on the valuation and existence of the investments as also the classification and disclosures in the Company's financial statements for the year ended 31 March 2020. |
|Refer Note 2.13 and 7 to the Standalone Financial Statements ||We have performed the following principal audit procedures in relation to investments: |
| || We obtained independent confirmation of the number of units held and net asset value per unit for each of the underlying investments as at the year end date. We agreed the details confirmed to the valuation of these investments as per the accounting records. |
| || Re-computation of profit/ (loss) on sale of investments valuation of investments including fair value movements. |
| || Review of valuation and classification of investment in accordance with Nature of investment made company's policies business model and applicable accounting standards. |
|3 Valuation of Biological assets: ||Principal Audit Procedures: |
|The value of Biological assets is measured at fair value less costs to sell. The fair value is determined based on the growth potential of individual standing crops. The growth potential varies depending on the geographic location and varieties of crops. The valuation requires estimates of growth harvest sales price and costs. ||We have performed the following principal audit procedures in relation to biological assets: |
| || We have tested management's controls and effectiveness of systems in place for the valuation of biological assets based on the stage of crop as measured by the company. |
|Due to the level of judgment involved in the valuation of biological assets involvement of discretionary assumptions by management regarding biological transformation and quality of crop and significance of biological assets to the Company's financial position this is considered to be a key audit matter. || We have assessed the key assumptions contained within the fair value calculations including sales price assumptions and growth assumptions. |
| || We have performed the analytical review of the results of valuation to highlight outliers which warrant further audit procedures. |
|Refer Note 2.5 and 12 to the Standalone Financial Statements || Comparison of actual production costs with provisions made towards standing crops. |
Information Other than the Standalone Financial Statements and Auditor's Report thereon
The Company's Board of Directors are responsible for the preparation of otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Financial and Operational Review Director's Report BusinessResponsibility Report Corporate Governance Report Annual Report on CSR activities butdoes not include the standalone financial statements and our auditor's report thereon. Theabove listed reports are expected to be made available to us after the date of thisauditor's report.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
When we read the above listed reports if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance.
Management's Responsibility for the Standalone Financial 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 financial statementsthat give a true and fair view of the financial position financial performance (changesin equity) 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 read with rules issued thereunder. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone 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.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibility for the Audit of Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial 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 canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis 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 standalonefinancial 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.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained upto the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the standalone 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 financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
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 inparagraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Companies Act 2013 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 purpose 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 the Statement of Changes inEquity and the Statement of Cash Flow dealt with by this Report are in agreement with thebooks of the account;
d) in our opinion the aforesaid standalone financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act read with rules madethereunder;
e) on the basis of written representations received from the directors as on 31 March2020 and taken on record by the
Board of Directors none of the directors is disqualified as on 31 March 2020 frombeing appointed as a director in terms 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 B'; and
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 opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the 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 standalone financial statements - Refer Note 37 to the standalonefinancial statements;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and
iii. there are no amounts which are required to be transferred to the InvestorEducation and Protection Fund by the Company for the year ended 31 March 2020.
To the Independent Auditor's Report
(Referred to in paragraph 1' under Report on Other Legal and RegulatoryRequirements' section of our report to the members of Kaveri Seed Company Limited)
i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) According to the information and explanations given to us the fixed assets havebeen physically verified during the year by the management in accordance with programme ofverification which in our opinion provides for physical verification of all the fixedassets at reasonable intervals having regard to the size of the Company and the nature oftheir assets. According to the information and explanations given to us the discrepanciesnoticed on such verification were not material and have been properly dealt with in thebooks of account.
(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 shownin fixed asset schedule are held in the name of Company as at the balance sheet date.
ii. As explained to us inventories were physically verified during the year by themanagement at reasonable intervals. The discrepancies noticed on physical verificationbetween the physical stocks and the book records were not material and they have beenproperly dealt with in the books of account.
iii. According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms limited liability partnershipsor other parties covered in the register maintained under section 189 of the Act.Accordingly paragraph 3 (iii) of the Order is not applicable.
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. In respect ofloans and investments made. The company has not given any guarantee and securities to anyperson to which provisions of the Section 185 and 186 of the Act are applicable.
v. In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits during the year to which the directions issued bythe Reserve Bank of India and provisions of Section 73 to Section 76 or any other relevantprovision of the Act and the Rules framed there under were applicable. Accordingly theprovisions of paragraph 3(v) of the Order are not applicable.
vi. In our opinion and according to the information and explanations given to us theCentral Government has not prescribed the maintenance of cost records under Section 148(1) of the Companies Act 2013 for the activities of the Company.
vii. According to the information and explanations given to us and according to thebooks and records as produced and examined by us in accordance with the generally acceptedauditing practices in India in respect of statutory dues:
(a) The Company is generally regular in depositing undisputed statutory dues includingprovident fund employee's state insurance income tax goods and service tax customduty cess and any other material statutory dues applicable to it with the appropriateauthorities during the year.
(b) There were no undisputed amounts payable in respect of provident fund income taxgoods and service tax customs duty value added tax and cess which were in arrears as at31 March 2020 for a period of more than six months from the date they become payable.
(c) The details of statutory dues which have not been deposited as on 31 March 2020 onaccount of disputes are given below:
|Statute ||Nature of dues ||Forum where dispute is pending ||Period to which the amount relates ||Amount involved (Rs. in Lakhs) |
|Central Excise Act ||Excise Duty ||Commissioner of Customs & central Excise Hyderabad ||April 2010 To March 2014 ||276.59 |
|APGST Act ||Purchase Tax ||Hon'ble High court of Andhra Pradesh ||April 2003 To March 2004 ||22.37 |
|Bihar VAT Act ||VAT & CST (Interest and penalty) ||Hon'ble High court of Bihar ||April 2012 To March 2013 ||11.94 |
viii. According to the information and explanations given to us the Company has notdefaulted in repayment of dues to government. The Company has not availed any loans frombanks or financial institutions and the Company has not raised any monies throughdebentures.
ix. According to the information and explanations given to us the Company has utilisedthe money raised by way of term loans for the purposes for which they were obtained. TheCompany did not raise any money by way of initial public officer or further public offer(including debt instruments) during the year.
x. During the course of our examination of the books and other records of the Companyin accordance with the generally accepted auditing practices in India and according to theinformation and explanations given to us no material fraud by the Company or on theCompany by its officers or employees has been noticed or reported during the year norhave we been informed of such case by the management.
xi. According to the information and explanations given to us and based on theexamination of records of the Company managerial remuneration has been paid or providedwith requisite approvals mandated in accordance with the provisions of section 197 readwith schedule V to the Companies Act 2013.
xii. According to the information and explanations given to us and based on ourexamination of the records the Company is not a Nidhi company. Accordingly paragraph3(xii) of the Order is not applicable.
xiii. According to the information and explanations given to us and based on theexamination of records of the Company all the transactions with the related parties arein compliance with Section 177 and 188 of the Act where applicable and the details ofrelated party transactions have been disclosed in the standalone financial statements asrequired by the applicable accounting standards.
xiv. According to the information and explanations given to us and based on the recordsof the Company examined by us the Company has not made preferential allotment or privateplacement of shares or fully or partly Convertible debentures during the year.
xv. In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with directorsor directors of its subsidiaries or persons connected with them and hence provisions ofSection 192 of the Act are not applicable.
xvi. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
To the Independent Auditor's Report
(Referred to in paragraph 2.f' under Report on Other Legal and RegulatoryRequirements' section of our report to the members of Kaveri Seed Company Limited of evendate)
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 Kaveri SeedCompany Limited ("the Company") as of March 31 2020 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
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.
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 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 reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A Company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
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.
In our opinion and according to the information and explanation given to us theCompany has in all material respects an adequate internal financial controls system overfinancial reporting and such internal financial controls over financial reporting wereoperating effectively as at 31 March 2020 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India.