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Kuantum Papers Ltd.

BSE: 532937 Sector: Industrials
NSE: KUANTUM ISIN Code: INE529I01021
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OPEN 43.20
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VOLUME 996
52-Week high 88.90
52-Week low 25.01
P/E 31.01
Mkt Cap.(Rs cr) 376
Buy Price 43.15
Buy Qty 2.00
Sell Price 43.45
Sell Qty 16.00
OPEN 43.20
CLOSE 43.20
VOLUME 996
52-Week high 88.90
52-Week low 25.01
P/E 31.01
Mkt Cap.(Rs cr) 376
Buy Price 43.15
Buy Qty 2.00
Sell Price 43.45
Sell Qty 16.00

Kuantum Papers Ltd. (KUANTUM) - Auditors Report

Company auditors report

To the Members of Kuantum Papers Limited

Report on the Audit of the Financial Statements

1. Qualified Opinion

We have audited the financial statements of Kuantum Papers Limited (“theCompany”) which comprise the balance sheet as at 31 March 2020 and the statement ofprofit and loss (including other comprehensive income) statement of changes in equity andstatement of cash flows for the year then ended and notes to the financial statementsincluding a summary of the significant accounting policies and other explanatoryinformation.

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matters described in the Basis for QualifiedOpinion section of our report the aforesaid financial statements give the informationrequired by the Companies Act 2013 (“Act”) in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia of the state of affairs of the Company as at 31 March 2020 its profit and othercomprehensive income changes in equity and its cash flows for the year ended on thatdate.

2. Basis for Qualified Opinion

Attention is invited to Note 40 to the financial statements which discloses the relatedparty transactions entered by the Company during the year. According to the informationprovided to us the Company has during the period January - March 2020 given advancesamounting to Rs. 1522.30 lakhs to its holding company which is having two directors ofthe Company holding more than 25% shares of the holding company apart from also being itsdirectors for supplies of certain raw materials to the Company as “advance forsupply of goods”. The amount outstanding on 31 March 2020 of Rs.1840.30 lakhs hasbeen received back subsequent to the year-end. In addition the Company has also issued acorporate guarantee of Rs. 1679.00 lakhs in relation to a loan taken by its holdingcompany. We have not been able to obtain sufficient and appropriate audit evidence toverify the nature and business rationale of the aforesaid advance given by the Company andalso the end use of the loan by the holding Company in relation to which the aforesaidcorporate guarantee was provided. Accordingly we are unable to comment on whether thesetransactions with the holding company comply with applicable laws and regulationsincluding section 177(4) 185 186(7) of Companies Act 2013 and Regulation 23 of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 as amended ('ListingRegulations') and the consequential impact if any on the financial statements for theyear ended and as at 31 March 2020.

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the 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 together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our qualified opinion.

1. Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.

Description of Key Audit Matter

(1) Impact of adopting the new income tax regime

See note 2(a)(vi) 2(n) 20 and 33 to the financial statements

The key audit matter How the matter was addressed in our audit
With effect from financial year 2019-2020 the Income Tax Act provides an option of paying income taxes at a lower rate subject to complying with certain prescribed conditions ('new tax regime'). The Company has opted to shift to the new tax regime from a specified financial year in the future. In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
• Examined the implications of the new provisions on the tax position of the company keeping in view the various interpretations to assess the impact of adopting the new tax regime from the specified future financial year.
Accordingly the deferred tax liabilities which are expected to reverse subsequent to the Company shifting to the new tax regime in the specified future year were remeasured and the consequential amount was recognised in the Statement of Profit and Loss of the current year. This amount is considered to be significant.
• Evaluated the design and implementation effectiveness of key internal controls regarding budgeting procedures upon which the forecasts are based and those on estimation of amount of deferred tax assets to be carried forward including MAT credit entitlement. We also tested the operating effectiveness of such controls
The determination of the point in time at which the aforesaid Company would shift to the new tax regime involves significant judgement and estimation regarding forecasting future taxable profits and realisation of MAT credit entitlement (an item of deferred tax assets). Since the impact of remeasurement of deferred tax liabilities as stated above is sensitive to these judgements and estimates it affects the amount of deferred tax liabilities that are reversed in the Statement of Profit and Loss of the current year.
• Tested appropriateness of forecasts of future taxable profits including revenue growth rates EBITDA growth rates and other tax positions based on our knowledge of the business and the observable market data of the industry.
• Also compared actual results of current year with forecasts made in previous year. Ascertained reasons for variance if any and assessed whether the same have been taken into consideration in preparing future forecasts.
Given the significant level of judgement involved and the quantitative significance we have determined this to be a key audit matter
• Assessed the recoverability of MAT credit entitlement (an item of deferred tax assets) against the forecast future taxable profits
• Assessed the adequacy of related disclosures in the financial statements.

(2) Procurement and physical verification of agriculture based raw materials See note2(a)(vi) 2(f) 10 and 27 to the financial statements

The key audit matter How the matter was addressed in our audit
The Company incurs significant costs on procurement of agriculture based raw material in bulk from various aggregators. The raw materials are susceptible to risk of incorrect weighing or measurement. Sound procurement processes involving critical attributes of raw material are required to mitigate this risk. In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
• We evaluated the design and implementation of key internal controls relating to acceptance of goods. We also tested the operating effectiveness of such controls through a combination of procedures involving observation re-performance and inspection of evidence of samples selected using statistical sampling.
Further the Company follows volume-based method for physical verification of raw material which involves a wide range of attributes such as the height of stockpiles area of spread etc making the measurement of raw material inventory complex and sensitive to the attributes. . We performed substantive testing by selecting samples (using statistical sampling) of purchase transactions recorded during the year by examining the underlying documents such as supplier invoices goods receipt notes etc.
In view of the above we have identified the confirmation of physical inventories of raw material as a key audit matter. • Assessed the appropriateness of the underlying data and estimates used for calculation of the yield ratio and compared the same with the previous years.
• Tested the manual journal entries to identify unusual items.
• Observed physical verification of raw materials selected using statistical sampling. We also assessed the appropriateness of the Company's standard operating procedures for conducting recording and reconciling physical verification of raw materials. On a sample basis we verified reconciliation of raw material as per physical verification with the corresponding book records.

2. Other Information

The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditors' reportthereon.

Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.

3 Management's and board of directors' Responsibility for the Financial Statements

The Company's management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these financial statementsthat give a true and fair view of the state of affairs profit and other comprehensiveincome changes in equity and cashflows of the Company in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standards (Ind AS)specified under section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safe guardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; 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 financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.

In preparing the financial statements management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

Board of Directors is also responsible for overseeing the Company's financial reportingprocess.

4. Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of 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 financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.

• 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 with reference to financial statements in place andthe operating effectiveness of such 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 up to 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 financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditors' report unless law or regulation precludes public disclosure about the matter orwhen 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.

5. Report on Other Legal and Regulatory Requirements

(A) As required by the Companies (Auditors' Report) Order 2016 (“the Order”)issued by the Central Government in terms of section 143 (11) of the Act we give in the“Annexure A” a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.

(B) As required by Section 143(3) of the Act we report that:

a) We have sought and except for the matters described in the Basis for QualifiedOpinion paragraph above obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.

b) Except for the effects / possible effects of the matters described in the Basis forQualified opinion paragraph above in our opinion proper books of account as required bylaw have been kept by the Company so far as it appears from our examination of thosebooks.

c) The balance sheet the statement of profit and loss (including other comprehensiveincome) the statement of changes in equity and the statement of cash flows dealt with bythis Report are in agreement with the books of account.

d) Except for the effects/ possible effects of the matters described in the Basis forQualified opinion paragraph above in our opinion the aforesaid financial statementscomply with the Ind AS specified under Section 133 of the Act.

e) The matters described in the Basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company.

f) On the basis of the written representations received from the directors as on 31March 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2020 from being appointed as a director in terms of Section164(2) of the Act.

g) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above.

h) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in “Annexure B”.

i) With respect to the other matters to be included in the Auditors' 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 as at 31 March 2020 onits financial position in its financial statements - Refer Note 37 (A) to the financialstatements;

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- Refer Note 35 B(iv)(c) to the financial statements;

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

iv. The disclosures in the financial statements regarding holdings as well as dealingsin specified bank notes during the period from 8 November 2016 to 30 December 2016 havenot been made in these financial statements since they do not pertain to the financialyear ended 31 March 2020.

(C) With respect to the matter to be included in the Auditors' Report under section197(16):

In our opinion and according to the information and explanations given to us theremuneration paid by the company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.

For BSR & Co. LLP
Chartered Accountants
Firm Registration No.: 101248W/W-100022
Gaurav Mahajan
Place : Chandigarh Partner
Date : 03 July 2020 Membership No: 507857
UDIN No. 20507857AAAABG3143

Annexure A to the Independent Auditors' Report on the financial statements of KuantumPapers Limited for the period ended 31 March 2020 (Referred to in paragraph 7 (A) under'Report on Other Legal and Regulatory Requirements' section of our report of even date).We report that:

(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 Company has aregular programme of physical verification of its fixed assets (including investmentproperty) by which all the fixed assets (including investment property) are verified in aphased manner over a period of three years. In accordance with this programme plant andequipment were verified during the year. In our opinion this periodicity of physicalverification is reasonable having regard to the size of the Company and the nature of itsassets. As explained to us no discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of the immovable properties areheld in the name of the Company.

(ii) The inventories except goods-in-transit have been physically verified by themanagement during the year. In our opinion the frequency of such verification isreasonable having regard to the size of the Company and the nature of its business. Asinformed to us no discrepancies were noticed on such verification between the physicalstocks and the book records.

(iii) Except for the effects / possible effects of the matters described in the Basisfor Qualified Opinion paragraph of our main audit report the Company has not granted anyloans secured or unsecured to companies firms limited liability partnerships or otherparties covered in the register maintained under section 189 of the Act. Thus paragraphs3 (iii) of the Order is not applicable.

(iv) According to the information and explanation given to us and on the basis ofexamination of records of the Company except for the effects / possible effects of thematters described in the Basis for Qualified Opinion paragraph of our main audit reportthe Company has not made any loans to directors investments provided any other guaranteeor security as specified under Section 185 and Section 186 of the Act.

(v) In our opinion and according to the information and explanations given to us theCompany has complied with the provision of Sections 73 to 76 or any other relevantprovisions of the Act and the rules framed thereunder where applicable the directivesissued by the Reserve bank of India as applicable with regard to deposits accepted fromthe public. As informed to us there have been no proceedings before the Company Law Boardor National Company Law Tribunal and Reserve Bank of India or any court or any othertribunal in this matter and no order has been passed by any of the aforesaid authoritiesin this regard.

(vi) We have broadly reviewed the books of account maintained by the Company in respectof the product covered where pursuant to the Rules made by the Central Government themaintenance of cost records has been prescribed under section 148 (1) of the Act inrespect of products covered and are of the opinion that prima facie the prescribedaccounts and records have been made and maintained. However we have not made a detailedexamination of the records with a view to ensuring whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including Provident Fund Employees' StateInsurance Income tax Goods and Services Tax ('GST') Duty of customs and other materialstatutory dues have been generally been regularly deposited during the year by the Companywith the appropriate authorities though there has been a slight delay in a few casesrelating to labour welfare fund.

According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees' State Insurance Income tax GST Duty ofcustoms and other material statutory dues were in arrears as at 31 March 2020 for a periodof more than six months from the date they became payable.

(b) According to the information and explanations given to us there are no dues ofIncome tax GST Duty of custom Duty of excise Value added tax Sales tax and Servicetax which have not been deposited with the appropriate authorities on account of anydispute except as mentioned below :

Name of the statute Nature of the Dues Amount Disputed* Rs. lakhs Amount Deposited Rs. lakhs Period to which the amount relates Forum where the dispute is pending
Income tax Act 1961 Income tax 7.57 " 2005-2006 (Assessment year) Commissioner of Income tax (Appeals)
Income tax Act 1961 Income tax 856.36 - 2016-2017 (Assessment year) Commissioner of Income tax (Appeals)
Income tax Act 1961 Income tax 96.26 - 2012-2013 (Assessment year) Commissioner of Income tax (Appeals)
Central Excise Act 1944 Excise duty 447 .36 - 2001-2001 to 2007-2008 Punjab and Haryana High Court
Central Excise Act 1944 Excise duty 65.06 - 2008 -2009 Commissioner (Appeals) Central Excise and Service

‘Amount are as per demand order and include interest and penalty whicheverindicated in the said orders.

(viii) According to the information and explanations given to us the Company has notdefaulted in repayment of loans or borrowings to its bankers or to any financialinstitutions and dues to debenture holders. The Company did not have any loans orborrowings from government during the year.

(ix) According to the information and explanations given to us the term loan taken bythe Company have been applied for the purposes for which they were raised. As informed tous the Company has not raised any moneys by way of initial public offer (including debtinstruments) or further public offer.

(x) According to the information and explanations given to us no fraud on or by theCompany by its officers or employees has been noticed or reported during the course of ouraudit for the year.

(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the managerial remuneration has been paid orprovided by the Company in accordance with the provision of section 197 read with ScheduleV of the Act.

(xii) According to the information and explanations given to us the Company is not aNidhi Company and thus paragraph 3 (xii) of the Order is not applicable.

(xiii) Except for the effects / possible effects of the matters described in the Basisfor Qualified Opinion paragraph of our main audit report according to the information andexplanations given to us and based on our examination of the records of the Companytransactions with the related parties are in compliance with section 177 and 188 of theAct where applicable and the details have been disclosed in the financial statements asrequired by the applicable accounting standards.

(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly paragraph 3(xiv) of the Order is not applicable.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with the directors or persons connected with them during the year.Accordingly paragraph 3(xv) of the Order is not applicable.

(xvi) According to the information and explanations given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.

For BSR & Co. LLP
Chartered Accountants
Firm Registration No.: 101248W/W-100022
Gaurav Mahajan
Place : Chandigarh Partner
Date : 03 July 2020 Membership No: 507857
UDIN No. 20507857AAAABG3143

Annexure B to the Independent Auditors' report on the financial statements of KuantumPapers Limited for the period ended 31 March 2020.

Report on the internal financial controls with reference to the aforesaid financialstatements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013(Referred to in paragraph 7(B)(f) under 'Report on Other Legal and RegulatoryRequirements' section of our report of even date)

Adverse Opinion

We have audited the internal financial controls with reference to financial statementsof Kuantum Papers Limited (“the Company”) as of 31 March 2020 in conjunctionwith our audit of the financial statements of the Company for the year ended on that date.

According to the information and explanations given to us and based on our audit thefollowing material weakness has been identified as at 31 March 2020:

a) The Company did not have appropriate internal control for advances and guaranteesprovided to its holding company which could potentially result in non compliance withapplicable provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 as amended and in potential materialmisstatements in the Company's financial statements.

A 'material weakness' is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the company's annual or interim financial statements willnot be prevented or detected on a timely basis.

In our opinion because of the effects/possible effects of the material weaknessesdescribed above on the achievement of the objectives of the control criteria the Companyhas not maintained adequate internal financial controls with reference to financialstatements and such internal financial controls were not operating effectively as at 31March 2020 based on the internal financial controls with reference to financialstatements 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.

We have considered the material weakness identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the 31 March 2020financial statements of the Company and the material weakness has affected our opinion onthe financial statements of the Company and we have issued a qualified opinion on thefinancial statements.

Management's Responsibility for Internal Financial Controls

The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. 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 (hereinafter referred to as“the Act”).

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing prescribed undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of such internal financial controlsassessing 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 judgement 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 adverse audit opinion on the Company's internal financial controlswith reference to financial statements.

Meaning of Internal Financial controls with Reference to Financial Statements

A company's internal financial controls with reference to financial statements 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 controlswith reference to financial statements include 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 the financialstatements.

Inherent Limitations of Internal Financial controls with Reference to FinancialStatements

Because of the inherent limitations of internal financial controls with reference tofinancial statements 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 withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

For BSR & Co. LLP
Chartered Accountants
Firm Registration No.101248W/W-100022
Gaurav Mahajan
Place : Chandigarh Partner
Date : 03 July 2020 Membership No.: 507857
UDIN No. 20507857AAAABG3143

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