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Kothari Industrial Corporation Ltd.

BSE: 509732 Sector: Agri and agri inputs
NSE: KOTHARINDL ISIN Code: INE972A01020
BSE 05:30 | 01 Jan Kothari Industrial Corporation Ltd
NSE 05:30 | 01 Jan Kothari Industrial Corporation Ltd

Kothari Industrial Corporation Ltd. (KOTHARINDL) - Auditors Report

Company auditors report

To the Members of

KOTHARI INDUSTRIAL CORPORATION LIMITED

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements ofKOTHARI INDUSTRIAL CORPORATION LIMITED ("the Company") which comprises theBalance Sheet as at March 312021 the Statement of Profit and Loss (including OtherComprehensive Income) Cash Flow Statement and the Statement of changes in equity for theyear then ended and a summary of significant accounting policies and other explanatoryinformation.

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 so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at March 31 2021 and loss changesin equity and its cash flows for the year ended on that date.

Basis of Opinion

We conducted our audit of the standalone financial statements inaccordance with the Standards on Auditing specified under section 143(10) of the Act(SAs). Our responsibilities under those Standards are further described in theAuditor's Responsibilities for the Audit of the Standalone Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (ICAI) together with theindependence requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the Rules made there under and we havefulfilled our other ethical responsibilities in accordance with these requirements and theICAI's Code of Ethics. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion on the standalone IndAS Financial Statements.

Material Uncertainty Related to Going Concern

The company has generated negative cash flows and incurred substantialoperating losses during the current year and earlier years. Its current liabilities farexceeds its current assets. In order to continue the company is apparently dependent onthe infusion of sufficient funds and restructuring of operations. There is thus in ouropinion existence of material risk as to the company's ability to continue as goingconcern . Based on the funds infused business plans and the diversification programmes ofthe management the company is reasonably assured to carry on the operations as a goingconcern. On this basis the company has prepared the financial statements on going concernbasis. Our conclusion is not qualified in respect of these matters.

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 not determined any matters to be the keyaudit matters to be communicated in our report.

Key Audit Matter Auditor's Response
Revenue recognition under Ind AS 115 Our procedures included:
The sales of various products traded by the company are generally on credit terms. The credit terms varies according to the nature of products namely Straight Fertilizers NPK Mixtures Agro Products Micro Bio Products Water Soluble Fertilizers etc. and relationship with the customers. It is noticed during the audit that the company has effective control through field officers to monitor the quantum of sales including types of products and value of goods sold on credit. The field officers are in constant touch with the customers and monitor recovery of dues and supply by goods on credit is conditioned by overdues from the customers. There is no procedure of charging overdue interest on overdue accounts but this is taken into account would affect the credit rating of the customers. The above procedure has been broadly reviewed to our satisfaction.
Most of the customers are long standing relationship with the company and are being serviced by Field Officers. The credit period varies according to the products mentioned above and also the credit worthiness of the customers. The credit period generally ranges from 30 to 120 days which is normal trade practice.
There is however no standard policy. The company has recently evolved effective online control system ensuring better supervision at the field level regional office etc.

INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS ANDAUDITOR'S REPORT THEREON

The Company's Board of Directors is responsible for thepreparation of the other information. The other information comprises the informationincluded in the Management Discussion and Analysis Board's Report includingAnnexures to Board's Report Business Responsibility Report Corporate Governance andShareholder's Information but does not include the standalone financial statementsand 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.

Without qualifying our report we draw attention to the following:

1. The financial statement has been presented on principles applicableto a going concern despite accumulated losses and consequent erosion of net worth thereis also significant mismatch between current liability and current assets therefore thereis material uncertainty in fulfilling the gabs within reasonable time. Significant amountof moneys being made available from time to time by associate companies of ManagingDirector for working funds and settlement of old creditors and would continue to do so.Further the business plan envisaged by management provides for large scale expansion withinjection of finance.(Refer Note No. 3).

2. No provision has been created in the accounts against loss that mayarise due to the claim raised by the Government against the Coonoor property. (Refer NoteNo. 4).

3. Arbitration Award against the Company regarding additionalelectricity dues of erstwhile Caustic Soda plant which is challenged by the Company beforeMadras High Court and pending Adjudication. (Refer Note No.5).

MANAGEMENT'S RESPONSIBILITY FOR THE STANDALONE FINANCIALSTATEMENTS

The Company's Board of Directors is responsible for the mattersstated in Section 134(5) of the Companies Act 2013 ("the Act") with respect tothe preparation of these standalone financial statements that give a true and fair view ofthe financial position financial performance including other comprehensive income cashflows and changes in equity of the company in accordance with the Indian AccountingStandards prescribed under Section 133 of the Act read with Rule 7 of the Companies(Indian Accounting Standards) Rules 2015 as amended and other accounting principlesgenerally accepted in India.

This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding 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.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONEFINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone 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 theoverride of internal control.

Obtain an understanding of internal financial controls relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls system in place and theoperating effectiveness of such controls.

Evaluate the appropriateness of accounting policies used and thereasonable ness 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 conditionsmay cause 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 event s in a manner thatachieves fair presentation.

Materiality is the magnitude of misstatements in the standalonefinancial statements that individually or in aggregate makes it probable that theeconomic decisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.

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 precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so 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 based on our audit wereport 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 Changes in Equity and the Statement of Cash Flow dealtwith by this Report are in agreement with the relevant books of account.

d) In our opinion the aforesaid standalone financial statements complywith the Ind AS specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014.

e) On the basis of the written representations received from thedirectors as on March 31 2020 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2020 from being appointed as a director in termsof Section 164 (2) of the Act.

f) 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 A". Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the Company's internalfinancial controls over financial reporting.

g) With respect to the other matters to be included in theAuditor's Report in accordance with the requirements of section 197(16) of the Actas amended:

In our opinion and to the best of our information and according to theexplanations given to us no remuneration was paid by the Company to its directors duringthe year.

h) With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 as amended in our opinion and to the best of our information and according tothe explanations given to us:

i. The Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements.

ii. The Company has made provision as required under the applicablelaw or accounting standards for material foreseeable losses if any on long-termcontracts including derivative contracts.

iii. There has been no delay in transferring amounts required to betransferred to the Investor Education 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) ofthe Act we give in "Annexure B" a statement on the matters specified inparagraphs 3 and 4 of the Order.

For M/s. Arockiasamy & Raj
Chartered Accountants
Firm Reg.No.006850S
Place : Chennai (A. Nagarajan)
Dated : 30.06.2021 Partner
Membership No. 020680

ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1(f) under ‘Report on Other Legal andRegulatory Requirements' section of our report to the Members of Kothari IndustrialCorporation Limited of even date)

Report on the Internal Financial Controls Over Financial Reportingunder Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")

1. We have audited the internal financial controls over financialreporting of KOTHARI INDUSTRIAL CORPORATION LIMITED ("the Company") as of Marc h31 2021 in conjunction with our audit of the standalone financial statements of theCompany for the year ended on that date.

MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

2. The Company's management is responsible for establishing andmaintaining 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. 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 respective 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.

AUDITOR'S RESPONSIBILITY

3. Our responsibility is to express an opinion on the internalfinancial controls over financial reporting of the Company based on our audit. Weconducted our audit in accordance with the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting (the "Guidance Note") issued by the Instituteof Chartered Accountants of India and the Standards on Auditing prescribed under Section143(10) of the Companies Ac t 2013 to the extent applicable to an audit of internalfinancial controls. Those Standards and the Guidance Note require that we comply withethic al 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.

4. Our audit involves performing procedures to obtain audit evidenceabout the adequacy of the internal financial controls system over financial reporting andtheir operating effectiveness. Our audit of internal financial controls over financialreporting include d obtaining an understanding of internal financial controls overfinancial reporting assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgment includingthe assessment of the risks of material misstatement of the financial statements whetherdue to fraud or error.

5. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion on the internal financialcontrols system over financial reporting of the Company.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

6. A company's internal financial control over financial reportingis a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes inaccordance 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 offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on thefinancial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIALREPORTING

7. Because of the inherent limitations of internal financial controlsover financial 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.

OPINION

8. In our opinion to the best of our information and according to theexplanations 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 March 31 2021 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 M/s. Arockiasamy & Raj
Chartered Accountants
Firm Reg.No.006850S
(A. Nagarajan)
Place : Chennai Partner
Dated : 30.06.2021 Membership No. 020680

ANNEXURE B' TO THE INDEPENDENT AUDITOR'S REPORT

Referred to in paragraph 1(f) under the heading ‘Report on OtherLegal & Regulatory Requirement' of our report of even date to the financialstatements of the Company for the year ended March 312021:

1. Fixed Assets:

a. The Company has maintained proper records showing full particularsincluding quantitative details and situation of fixed assets;

b. The Fixed Assets have been physically verified by the management ina phased manner which in our opinion is reasonable having regard to the size of thecompany and nature of its business.

c. The title deeds of immovable properties are held in the name of thecompany.

2. The management has conducted the physical verification of inventoryat reasonable intervals.

3. The Company has not granted any loans secured or unsecured tocompanies firms Limited Liability partnerships or other parties covered in the Registermaintained under section 189 of the Act. Accordingly the provisions of clause 3 (iii) (a)to (C) of the Order are not applicable to the Company and hence not commented upon.

4. In our opinion and according to the information and explanationsgiven to us the company has complied with the provisions of section 185 and I86 of theCompanies Act 2013 In respect of loans investments guarantees and security.

5. According to the information and explanations given to us thecompany has not accepted any Public Deposits during the year.

6. As informed to us the maintenance of Cost Records has not beenspecified by the Central Government under sub-section (1) of Section 148 of the Act inrespect of the activities carried on by the company.

7. The Company is not regular in depositing undisputed statutory duesincluding provident fund service tax Goods and Service Tax income tax (tax deducted atsource) professional tax and property tax.

(a) According to information and explanations given to us and on thebasis of our examination of the books of account and records the Company has not beengenerally regular in depositing undisputed statutory dues including Provident FundEmployees State Insurance Income-Tax Goods and Service Tax Duty of Customs and anyother statutory dues with the appropriate authorities.

(b) According to the information and explanations given to us theextent of arrears of undisputed amount outstanding as on 31st March 2021 for a period ofmore than six months from the date they became payable as certified by the Management isas under

Rs.
Income Tax (TDS)* 5741930
Professional Tax 1873571

(c) According to the information and explanations given to us Thereare no disputed dues of Income Tax Customs Duty Cess and other material statutory duesexcept the following.

Name of the statue Nature of dues Amount (in lacs) Period to which the amount relates Forum where dispute is pending
Tamilnadu Branch Transfer of Fertilisers Non receipt of ‘C' forms and disputed tax on sulphur loan TNGST&CST 872.97 1988-89 to 1991-92 D.C.C.T appeals STAT and High court stay
Karnataka Turnover tax on NPK Mixture KST 3.87 1996-97 STAT - Stay
Kerala Disputed rate of tax KGST 0.05 2001-02 STAT - Stay
Total 876.89
Remanded back to Assessing authorities: Branch transfer of fertilisers non receipt of ‘C' forms and disputed taxes TNGST&CST 77.42 1985-86 to 1997-98 D.C.C.T appeals STAT and High court

8. On the basis of verification of records and according to theinformation and explanations given to us the Company has defaulted in repayment of loansor borrowings to Financial Institutions and subsequently settled the matter thru courtNCLT proceedings and assignments. The company has not raised any monies against issue ofdebentures.

9. Based upon the audit procedures performed and the information andexplanations given by the management the company has not raised moneys by way of initialpublic offer or further public offer including debt instruments and term Loans.Accordingly the provisions of clause 3 (ix) of the Order are not applicable to theCompany and hence not commented upon.

10. To the best of our knowledge and according to the information andexplanations given to us no fraud by the Company or no material fraud on the Company byits officers or employees has been noticed or reported during the year.

11. Based upon the audit procedures performed and the information andexplanations given by the management the company has not paid any managerial remunerationduring the year.

12. In our opinion the Company is not a Nidhi Company. Therefore theprovisions of clause 4 (xii) of the Order are not applicable to the Company.

13. In our opinion all transactions with the related parties are incompliance with section 177 and 188 of Companies Act 2013 and the details have beendisclosed in the Financial Statements as required by the applicable accounting standards.

14. During the year the company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures.Accordingly the provisions of clause (xiv) of para 3 of the Order are not applicable tothe company.

15. Based upon the audit procedures performed and the information andexplanations given by the management the company has not entered into any non-cashtransactions with directors or persons connected with him. Accordingly the provisions ofclause 3 (xv) of the Order are not applicable to the Company and hence not commented upon.

16. In our opinion the company is not required to be registered undersection 45 IA of the Reserve Bank of India Act 1934 and accordingly the provisions ofclause 3 (xvi) of the Order are not applicable to the Company and hence not commentedupon.

For M/s. Arockiasamy & Raj
Chartered Accountants
Firm Reg.No.006850S
(A. Nagarajan)
Place : Chennai Partner
Dated : 30.06.2021 Membership No. 020680

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