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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 of KOTHARI INDUSTRIALCORPORATION LIMITED ("the Company") which comprises the Balance Sheet as atMarch 312020 the Statement of Profit and Loss (including Other Comprehensive Income)Cash Flow Statement and the Statement of changes in equity for the year then ended and asummary of significant accounting policies and other explanatory information.

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 true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 312020 and loss changes in equity and itscash flows for the year ended on that date.

Basis of Opinion

We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). 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 independencerequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and the Rules made there under 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 audit opinion on the standalone Ind AS Financial Statements.

Material Uncertainty Related to Going Concern

The company has generated negative cash flows and incurred substantial operating lossesduring the current year and earlier years. Its current liabilities far exceeds its currentassets. In order to continue the company is apparently dependent on the infusion ofsufficient funds and restructuring of operations. There is thus in our opinionexistence of material risk as to the company's ability to continue as going concern. Basedon the funds infused business plans and the diversification programmes of the managementthe company is reasonably assured to carry on the operations as a going concern. On thisbasis the company has prepared the financial statements on going concern basis. Ourconclusion is not qualified in respect of these matters.

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 not determined any matters to be the key auditmatters 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 over dues 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. The company has recently evolved effective online control system ensuring better supervision at the field level regional office etc.
There is however no standard policy.

INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON

The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the standalone financial statements and our auditor's report thereon.

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.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Without qualifying our report we draw attention to the following:

1. The financial statement has been presented on principles applicable to a goingconcern despite accumulated losses and consequent erosion of net worth there is alsosignificant mismatch between current liability and current assets therefore there ismaterial uncertainty in fulfilling the gabs within reasonable time. Significant amount ofmoneys being made available from time to time by associate companies of Managing Directorfor working funds and settlement of old creditors and would continue to do so. Furtherthe 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 may arise due to theclaim raised by the Government against the Coonoor property. (Refer Note No. 4).

3. Arbitration Award against the Company regarding additional electricity dues oferstwhile Caustic Soda plant which is challenged by the Company before Madras High Courtand pending Adjudication. (Refer Note No.5).

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 Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance including other comprehensive income cash flows andchanges in equity of the company in accordance with the Indian Accounting Standardsprescribed under Section 133 of the Act read with Rule 7 of the Companies (IndianAccounting Standards) Rules 2015 as amended and other accounting principles generallyaccepted in India.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; 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.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE 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 standalone 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 ofinternal control.

• Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonable nessof 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 standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and event s in a manner that achievesfair presentation.

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 financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.

We communicate with those 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 Section 143(3) of the Act based on our audit 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 including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of account.

d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified 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 the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct.

f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.

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 no remuneration was paid by the Company to its directors during the year.

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 as amended 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 its financialposition in its standalone financial statements.

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.

iii. There has been no delay in transferring amounts required to be transferred tothe 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) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.

For M/s. Arockiasamy & Raj
Chartered Accountants
Firm Reg.No.006850S
Chennai (A. Nagarajan)
Dated : 31.7.2020 Partner
Membership No. 020680

ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1(f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Kothari Industrial CorporationLimited of even date)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

1. We have audited the internal financial controls over financial reporting of KOTHARIINDUSTRIAL CORPORATION LIMITED ("the Company") as of Marc h 31 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

2. 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to respective company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

AUDITOR'S RESPONSIBILITY

3. Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAc t 2013 to the extent applicable to an audit of internal financial controls. ThoseStandards and the Guidance Note require that we comply with ethic al requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting include dobtaining 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.

5. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the internal financial controls system overfinancial reporting of the Company.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

6. A company's internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures 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

7. 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.

OPINION

8. In our opinion to the best of our information and according to the explanationsgiven to us the Company has in all material respects an adequate internal financialcontrols system over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at March 31 2020 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial 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)
Chennai Partner
Dated : 31.7.2020 Membership No. 020680

ANNEXURE B ' TO THE INDEPENDENT AUDITOR'S REPORT

Referred to in paragraph 1(f) under the heading ‘Report on Other Legal &Regulatory Requirement' of our report of even date to the financial statements of theCompany for the year ended March 312020:

1. Fixed Assets:

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

b. The Fixed Assets have been physically verified by the management in a phased mannerwhich in our opinion is reasonable having regard to the size of the company and nature ofits business.

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

2. The management has conducted the physical verification of inventory at reasonableintervals.

3. 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 the provisions of clause 3 (iii) (a) to (C) of theOrder are not applicable to the Company and hence not commented upon.

4. In our opinion and according to the information and explanations given to us thecompany has complied with the provisions of section 185 and I86 of the Companies Act 2013In respect of loans investments guarantees and security.

5. According to the information and explanations given to us the company has notaccepted any Public Deposits during the year.

6. As informed to us the maintenance of Cost Records has not been specified by theCentral Government under sub-section (1) of Section 148 of the Act in respect of theactivities carried on by the company.

7. The Company is not regular in depositing undisputed statutory dues includingprovident fund service tax Goods and Service Tax income tax (tax deducted at source)professional tax and property tax.

(a) According to information and explanations given to us and on the basis of ourexamination of the books of account and records the Company has not been generallyregular in depositing undisputed statutory dues including Provident Fund Employees StateInsurance Income-Tax Goods and Service Tax Duty of Customs and any other statutorydues with the appropriate authorities.

(b) According to the information and explanations given to us the extent of arrears ofundisputed amount outstanding as on 31st March 2020 for a period of more than six monthsfrom the date they became payable as certified by the Management is as under

Rs.
Income Tax (TDS)* 6021792
Professional Tax 1830465

(c) According to the information and explanations given to us There are no disputeddues of Income Tax Customs Duty Cess and other material statutory dues except thefollowing.

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 the information andexplanations given to us the Company has defaulted in repayment of loans or borrowings toFinancial Institutions and subsequently settled the matter thru court NCLT proceedingsand assignments. The company has not raised any monies against issue of debentures.

9. Based upon the audit procedures performed and the information and explanations givenby the management the company has not raised moneys by way of initial public offer orfurther public offer including debt instruments and term Loans. Accordingly theprovisions of clause 3 (ix) of the Order are not applicable to the Company and hence notcommented upon.

10. To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company or no material fraud on the Company by its officersor employees has been noticed or reported during the year.

11. Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not paid any managerial remuneration during theyear.

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

13. In our opinion all transactions with the related parties are in compliance withsection 177 and 188 of Companies Act 2013 and the details have been disclosed in theFinancial Statements as required by the applicable accounting standards.

14. During the year the company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures. Accordingly the provisionsof clause (xiv) of para 3 of the Order are not applicable to the company.

15. Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not entered into any non-cash transactions withdirectors or persons connected with him. Accordingly the provisions of clause 3 (xv) ofthe Order are not applicable to the Company and hence not commented upon.

16. In our opinion the company is not required to be registered under section 45 IA ofthe Reserve Bank of India Act 1934 and accordingly the provisions of clause 3 (xvi) ofthe Order are not applicable to the Company and hence not commented upon.

For M/s. Arockiasamy & Raj
Chartered Accountants
Firm Reg.No.006850S
(A. Nagarajan)
Chennai Partner
Dated : 31.7.2020 Membership No. 020680

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