To The Members of K M Sugar Mills Limited Report on the StandaloneFinancial Statements Opinion
We have audited the accompanying Standalone financial statements of K MSugar Mills Limited ("the Company") which comprises the Balance Sheet as atMarch 31 2020 the Statement of Profit and Loss (including other comprehensive income)statement of changes in equity and statement of cash flows for the year ended on that dateand notes to the financial statements including a summary of significant accountingpolicies and other explanatory information (hereinafter referred to as "thestandalone financial statements").
In our opinion and to the best of our information and according to theexplanations given to us the aforesaid ^standalone financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020and profit and total comprehensive income changes in equity and its cash flows for theyear ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements inaccordance with the Standards on Auditing (SAs) specified under section 143(10) of theCompanies Act 2013. Our responsibilities under those Standards are further described inthe Auditor's Responsibilities for the Audit of the 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 thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the standalone financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial 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 report.
|Key Audit Matter ||Auditor's Response |
|1 Valuation of inventory of sugar : ||Principal Audit Procedures |
|As on March 31 2020 the Company has inventory of sugar with a carrying value INR 24386.46 lakhs. The inventory of sugar is valued at the lower of cost and net realizable value. We considered the value of the inventory of sugar as a key audit matter given the relative value of inventory in the financial statements and significant judgement involved in the consideration of factors such as minimum sale price monthly quota fluctuation in selling prices and related notifications of the Government in valuation of NRV. ||We understood and tested the design and operating effectiveness of controls as established by the management in determination of cost of production and net realizable value of inventory of sugar. We considered various factors including the prevailing selling price during and subsequent to the year end minimum selling price & monthly quota and notifications of the Government of India initiatives taken by the Government with respect to sugar industry as a whole. |
|Based on the above procedures performed the management's determination of the net realizable value of the inventory of sugar as at the year-end and comparison with cost for valuation of inventory is considered to be reasonable. |
|2 Impact of government policies/ notifications on recognition of subsidy accruals/claims and their recoverability ||Principal Audit Procedures |
|During the year the company has recognized assistance on sugar quota export subsidy claims amounting to Rs. 14.57 crores in terms of Schemes notified by the Central Government to offset the cane cost for sugar season 2018-19 and Rs. 4.38 crores for defraying expenditure towards internal transport freight handling and other charges on export. We considered this as a key audit matter because recognition of subsidy claim is subject to satisfaction of certain conditions mentioned in the related notification. Asses sment of recoverability of the claims is subject to significant judgment of the management including certainty with respect to the satisfaction of conditions specified in the notifications /policies collections thereof. ||We understood and tested the design and operating effectiveness of controls as established by management in recognition and assessment of the recoverability of the claims. We evaluated the management's assessment regarding reasonable certainty for complying with the relevant conditions as specified in the notifications / policies and collections. We considered the relevant notifications/policies issued by various authorities to ascertain the appropriateness of the recognition of accruals / claims adjustments to claim s already recognized pursuant to changes in the rates and basis for determination of claims. Based on the above procedures performed the management's estimates related to recognition of subsidy accruals /claim and there recoverability are considered to be reasonable. |
|3 Deferred tax asset relating to MAT Credit Entitlement: ||Principal Audit Procedures |
|We have assessed the management's judgement |
|The company has recognised deferred tax asset relating to MAT credit entitlement. The recoverability of this deferred tax asset relating to MAT credit entitlement is dependent upon the generation of sufficient future taxable profit to utilise such entitlement within the stipulated period prescribed under the Income Tax Act 1961. We identified this as a key audit matter because significant judgement is required in forecasting future taxable profits for recognition of deferred tax asset relating to MAT credit entitlement. ||relating to the forecasts of future revenue taxable profits and evaluated the reasonableness of the considerations/ assumptions underlying the preparation of these forecasts. |
|Based on the above procedures performed the recognition and measurement of deferred tax asset relating to MAT credit entitlement are considered adequate and reasonable. |
|4 Contingent Liabilities : ||Principal Audit Procedures |
|There are various litigations pending before various forums against the Company and management's judgement is required for estimating the amount to be disclosed as contingent liability. ||We have obtained an understanding of the Company's internal instructions and procedures in respect of estimation and disclosure of contingent liabilities and adopted the following audit procedures: |
|We identified this as a key audit matter because the estimates on which these amounts are based involve a significant degree of management judgement in interpreting the cases and it may be subject to management bias. ||- understood and tested the design and operating effectiveness of controls as established by the management for obtaining all relevant information for pending litigation cases; |
|- discussing with management any material developments and latest status of legal matters; |
|- read various correspondences and related documents pertaining to litigation cases produced by the management and relevant external legal opinions obtained by the management and performed substantive procedures on calculations supporting the disclosure of contingent liabilities; |
|- examining management's judgements and assessments whether provisions are required; |
|- considering the management assessments of those matters that are not disclosed as the probability of material outflow is considered to be remote; |
|- reviewing the adequacy and completeness of disclosures; |
|Based on the above procedures performed the estimation and disclosures of contingent liabilitise are considered to be adequate and reasonable. |
Information Other than the Standalone Financial Statements andAuditor's Report Thereon
The Company's Board of Directors is responsible for the preparation ofthe other information. The other information comprises the information included in theManagement Discussion and Analysis Board's Report including Annexures to Board's ReportBusiness Responsibility Report Corporate Governance and Shareholder's Information butdoes not include the standalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially misstated.
If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the financial position financialperformance total comprehensive income changes in equity and cash flows of the Companyin accordance with accounting principles generally accepted in India including theaccounting Standards 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 accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statement that givea true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the 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 no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing thecompany's financial reporting process.
Auditor's Responsibility for the Audit of the Standalone FinancialStatements
Our objectives are to obtain reasonable assurance about whether thefinancial 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 professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal financial controls relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Act we are also responsible for expressingour opinion on whether the Company has adequate internal financial controls system inplace and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as 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 the standalone 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.
Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period 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 As required by theCompanies (Auditor's Report) Order 2016 ("the Order") issued by the CentralGovernment of India in terms of sub-section (11) of section 143 of the Act we give in theAnnexure 'A' a statement on the matters specified in paragraphs 3 and 4 of the Order tothe extent applicable.
As required by Section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.
b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including othercomprehensive income Statement of Change in Equity and the Statement of Cash Flow dealtwith by this Report are in agreement with the books of account.
d) In our opinion the aforesaid standalone financial statements complywith the Indian Accounting Standards specified under Section 133 of the Act read withRule 7 of the Companies (Accounts) Rules 2014.
e) On the basis of the written representations received from thedirectors as on 31st March 2020 taken on record by the Board of Directors none of thedirectors is disqualified as on 31st March 2020 from being appointed as a director interms of Section 164 (2) of the Act.
f) With respect to the other matters to be included in the Auditor'sReport in accordance 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 theexplanations given to us the remuneration paid by the Company to its directors during theyear is subject to requisite approval in accordance with the provisions of section 197 ofthe Act. Refer Note 36.17 of the standalone financial statements for more details.
g) With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure B". Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the Company's internal financialcontrols over financial reporting.
h) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 inour opinion and to the best of our information and according to the explanations given tous:
i. the Company has disclosed the impact of pending litigations on itsfinancial position in its Standalone financial Statements - Refer Note - 36.5 to theStandalone financial statements;
ii. the company did not have any long term contract includingderivative contracts for which there were any material foreseeable losses; and
iii. there were no amounts which were required to be transferred to theInvestor Education and Protection Fund by the Company.
| ||For Agiwal & Associates |
| ||Chartered Accountants |
| ||(FRN: 000181N) |
| ||P.C. Agiwal |
| ||Partner |
| ||M. No. 080475 |
|Place: New Delhi ||UDIN -20080475AAAABT5120 |
|Date: 12.06.2020 || |
ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT
The Annexure 'A' referred to in our Independent Auditors' Report to themembers of the Company on the Standalone financial statements of K.M. Sugar Mills Limitedfor the year ended 31st March 2020 we report that:
(i) In respect of its fixed assets :
(a) The Company has generally maintained records to show particularsincluding quantitative details and situation of fixed assets but its updation is inprogress;
(b) The fixed assets covering significant value were physicallyverified during the year by the management at such intervals which in our opinionprovides for the physical verification of all the fixed assets at reasonable intervalshaving regard to the size of the Company and nature of its business. According to theinformation and explanations given to us no material discrepancies were noticed on suchverification;
(c) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of immovableproperties are held in the name of company.
(ii) According to the information and explanations given to us theinventories have been physically verified by the management to the extent practicable atreasonable intervals during the year and as explained there was no material discrepanciesnoticed on such verification.
(iii) According to the information and explanations given to us theCompany has not granted secured or unsecured loan to companies firms LLP or otherparties covered in the register maintained under Section 189 of the Companies Act 2013.Therefore the provisions of clause 3(iii) (iii)(a) (iii)(b) and (iii)(c) of the saidorder are not applicable to the Company.
(iv) In our opinion and according to the information and explanationsgiven to us the Company is in compliance with the provisions of section 185 and 186 ofCompanies Act 2013 as on 31.03.2020 with respect to the loans investments guaranteesand security provided by it.
(v) According to the information and explanations given to us theCompany has not accepted any deposits during the year. Hence the directives issued by theReserve Bank of India and the provisions of section 73 to 76 or any other relevantprovisions of the Companies Act 2013 and the rules framed thereunder are not applicableto the Company.
(vi) In our opinion and according to the information and explanationsgiven to us specified cost accounts and records as prescribed by the Central Governmentin terms of sub-section (1) of section 148 of the Companies Act 2013 have been primafacie made and maintained by the company. However we have not nor we are requiredcarried out any detailed examination of such accounts and records.
(vii) (a) According to the information and explanations
given to us and on the basis of our examination of the records theCompany is generally regular in depositing undisputed statutory dues including providentfund employees' state insurance income-tax sales-tax service tax duty of customsduty of excise value added tax goods and service tax cess and any other materialstatutory dues to the appropriate authorities to the extent these are applicable exceptsome small delays. According to the information and explanations given to us noundisputed dues were in arrears as at 31st March 2020 for a period of more than sixmonths from the date they become payable.
(b) According to the information and explanations given to us thefollowing dues of income tax sales tax and value added tax have not been deposited by theCompany on account of disputes :
|Name of the statute ||Nature of dues ||Gross demand Amount (Rs. in lakhs ) ||Amount paid under protest (Rs. in lakhs ) ||Period to which pertain ||Forum where dispute is pending |
|Entry Tax Act ||Entry Tax ||1.34 ||1.3 4 ||2 0 1 2 -1 3 ||Additional C om m i ss io ner (Appeal) Commercial Ta x Faizabad |
|Central Sales Tax ||CST ||0.89 ||- ||2016-17 ||Additional Commissioner (Appeal) Commercial Tax Faizabad |
|Value Added Tax ||VAT ||2.04 ||2.04 ||2013-14 ||Additional Commissioner (Appeal) Faizabad |
|Value Added Tax ||VAT ||5.23 ||2.09 ||2014-15 ||Additional Commissioner (Appeal) Faizabad |
|Valu e Added Tax ||VAT ||9.22 ||4.61 ||2015-1 6 ||Additional Commissioner (Appeal) Faizabad |
|Value Added Tax ||VAT ||12.48 ||0.52 ||2016-17 ||Additional Commissioner (Appeal) Faizabad |
(viii) Based on our audit procedure and according to the ^^informationand explanations given to us we are of the opinion that the company has not defaulted inrepayment of loans / borrowings to the financial institutions banks Government or adebenture holders at the end of year.
(ix) According to the information and explanations given to us theCompany has applied the term loans for the purpose for which those were raised.
(x) To the best of our knowledge and according to the information andexplanations given to us no material fraud by the company or on the Company by itsofficers or employees has been noticed or reported during the course of our audit.
(xi) According to our information and explanations given to us andbased on our examination of the records of the Company managerial remuneration has beenpaid / provided during the year is subject to requisite approval of the shareholders asmandated by the provisions of section 197 read with Schedule V to the Act. Kindly referNote 36.17 of the standalone financial statements.
(xii) In our opinion and according to the information and explanationsgiven to us the Company is not a Nidhi company.
(xiii) In our opinion and according to the information and explanationsgiven to us and based on our examination of the records of the company transactions withthe related parties are in compliance with sections 177 and 188 of the Act whereapplicable and details of such transactions have been disclosed in the financial statementas required by the applicable accounting standards.
(xiv) According to the information and explanations given to us andbased on our examination of the records of the company the company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year.
(xv) In our opinion and according to the information and explanationsgiven to us and based on our examination of the records of the company the company hasnot entered into non-cash transactions with directors or persons connected with him.
(xvi) As per our information the company is not required to beregistered under Section 45-1A of the Reserve Bank of India Act 1934.
| ||For Agiwal & Associates |
| ||Chartered Accountants |
| ||(FRN: 000181N) |
| ||P.C. Agiwal |
| ||Partner |
| ||M.No. 080475 |
| ||UDIN -20080475AAAABT5120 |
|Place: New Delhi || |
|Date: 12.06.2020 || |
Annexure - B to the Independent Auditors' Report
Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financialreporting of K.M. Sugar Mills Limited. ("the Company") as of 31 March 2020 inconjunction with our audit of the Standalone financial statements of the Company for theyear ended on that date.
Management's Responsibility for Internal Financial Controls
The board of directors of the company is responsible for establishingand maintaining internal financial controls 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 ('ICAI').These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013. Auditors'Responsibility
Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls over^Financial Reporting (the "Guidance Note") and the Standards on Auditingissued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act2013 to the extent applicable to an audit of internal financial controls both applicableto an audit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate 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 aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the standalone financial statements whether due tofraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internal financialcontrols system over financial reporting of the Company.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directors of thecompany; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the company's assets thatcould have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over FinancialReporting
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to theexplanation given to us the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st 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 CharteredAccountants of India.
| ||For Agiwal & Associates |
| ||Chartered Accountants |
| ||(FRN: 000181N) |
| ||P.C. Agiwal |
| ||Partner |
| ||M. No. 080475 |
| ||UDIN -20080475AAAABT5120 |
|Place : New Delhi || |
|Date : 12.06.2020 || |