To the Members of LT Foods Limited
Report on the Audit of the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of LT Foods Limited(the Company') which comprise the Balance Sheet as at March 31 2019 the Statementof Profit and Loss (including Other Comprehensive Income) the Cash Flow Statement and theStatement of Changes in Equity for the year then ended and a summary of the significantaccounting policies and other explanatory information.
2. 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 (Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India includingIndian Accounting Standards (Ind AS') specified under section 133 of the Act of thestate of affairs (financial position) of the Company as at March 31 2019 and its profit(financial performance including other comprehensive income) its cash flows and thechanges in equity for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards 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 (ICAI') togetherwith the ethical requirements that are relevant to our audit of the financial statementsunder the 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 opinion.
Key Audit Matters
4. 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.
5. We have determined the matters described below to be the key audit matters to becommunicated in our report.
|Key audit matter ||How our audit addressed the key audit matter |
|Revenue recognition Sale of products Refer Note 1(i) in the Summary of significant accounting policies and other explanatory information ||Our audit procedures included but were not limited to the following: |
|The Company recognised an amount of ` 219255.55 lakhs as revenue for the year ended March 31 2019 as disclosed in Note 29 to the financial statements. || Obtained an understanding of the process of revenue stream of sale of rice and other food products. |
|Revenue of the Company majorly comprises revenue from sale of rice and other food products. || Evaluated the design implementation and tested the operating effectiveness of key controls over revenue recognition including around quantity sold pricing and accounting of revenue transactions; |
|In accordance with Standards on Auditing there is a presumed fraud risk relating to revenue recognition. Further there is continuous pressure on the management to achieve planned results. Accordingly occurrence and existence of revenue is a key focus area on account of the multiple channels for sales various categories of customers and significant variations in sales quantities during certain periods of the year. Further there are sporadic high value transactions requiring special audit attention and evaluation as they involve varying terms of contracts with such customers. || Performed substantive analytical procedures on revenue which included ratio analysis product mix analysis region wise analysis etc; |
| || Evaluated the terms and conditions of the contracts including incoterms with customers to ensure that the revenue recognition criteria are assessed by the management in accordance with the accounting standards; |
| || On a sample basis tested revenue transactions recorded during the year and revenue transactions recorded in the period before and after year-end with supporting documents such as invoices agreements with customers proof of deliveries and subsequent collection of payments; |
|Due to the above factors we have identified testing of revenue recognition as a key audit matter. || Performed other substantive audit procedures including obtaining debtor confirmations on a sample basis and reconciling revenue recorded during the year with statutory returns; |
| || Tested manual journal entries impacting revenue including credit notes claims etc. which were material or irregular in nature with supporting documents and evaluated business rationale thereof. |
| || Evaluated disclosures made in the financial statement for revenue recognition from sale of goods for appropriateness in accordance with the accounting standards. |
|Inventory existence and valuation ||Our audit procedures included but were not limited to the following: |
|Refer Note 1(a) in the Summary of significant accounting policies and other explanatory information ||Existence: |
|The Company held inventories amounting to ` 89940.79 lakhs as at March 31 2019. The inventory primarily comprises of paddy and finished rice. Inventory holding is generally significant at the end of the financial year considering seasonality of the agricultural produce of paddy. Such inventory is stored in plants warehouses silos yards and storage bags. High quantity of inventory at the year-end makes inventory physical verification an extensive procedure for the management. || Obtained understanding of management process of inventory management and inventory physical verification performed at year end; |
| || Evaluated the design effectiveness of controls over inventory management process/inventory physical verification and tested key controls for their operating effectiveness; |
| || Observed physical count carried out by the management at locations selected based on materiality and risk factors; |
| || During the above said observation we noted whether the instructions given by senior management to stock count teams were followed including ensuring proper segregation of stock use of calibration scales/charts separate identification of goods received after year end identification of damaged inventory if any etc. |
|The production process of rice involves mixing of different varieties of purchased rice and rice manufactured from paddy and also leads to generation of by-products such as bran husk and broken rice. Production process also involves ageing the paddy/ rice to achieve desired quality of end produce. The valuation of finished rice is a complex exercise and is carried out manually through excel spreadsheets. The valuation process involves estimation around determination of || |
| || Recounted inventory on sample basis to match with inventory records and results of management conducted count; and |
| || Reviewed reconciliation of differences if any between management physical count and inventory records and tested the necessary adjustment made in the inventory records by the management. |
| Overhead absorption rates || |
| Determination of yield || |
| Determination of net realisable value of by-products and ||Valuation: |
| Calculation of holding period and determination of weighted average borrowing cost. || Obtained an understanding of management process of inventory valuation; |
|Accordingly existence and valuation of year-end inventory balance which is significant with respect to the total assets held by the Company is considered to be one of the areas which required significant auditor attention owing to the complexity and judgements involved in the process of physical count and valuation. || |
| || Evaluated design effectiveness of controls over inventory valuation process and tested key controls for their operating effectiveness; |
| || Tested inputs into the valuation process from source documents/ general ledger accounts; |
| || Tested reconciliation of opening inventory purchase/ production sales and year-end inventory to validate of yield during the year and to identify any abnormal production loss |
| || Compared key estimates including those involved in computation of overhead absorption and borrowing cost to prior years and enquired reasons for any significant variations |
| || Checked net realisable value of by-products from actual sales proceeds near/ subsequent to the year-end and |
| || Tested arithmetical accuracy of valuation calculations. Evaluated appropriateness of disclosure of inventory year-end balance in the financial statements. |
Information other than the Financial Statements and Auditor's Report thereon
6. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe financial statements and our auditor's report thereon. The Annual Report is expectedto be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
When we read the Annual Report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
7. The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the state of affairs (financial position) profit orloss (financial performance including other comprehensive income) changes in equity andcash flows of the Company in accordance with the accounting principles generally acceptedin India including the Ind AS specified under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the 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 statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
8. In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
9. Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
10. 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 withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.
11. As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain 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.
Under section 143(3)(i) of the Act we are also responsible for explaining ouropinion on whether the company has adequate internal financial controls system in placeand the 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.
12. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
13. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
14. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror 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
15. As required by section 197(16) of the Act we report that the Company has paidremuneration to its directors during the year in accordance with the provisions of andlimits laid down under section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditor's Report) Order 2016 (the Order')issued by the Central Government of India in terms of section 143(11) of the Act we givein the Annexure A a statement on the matters specified in paragraphs 3 and 4 of theOrder.
17. Further to our comments in Annexure A as required by section 143(3) of the Act wereport that:
a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;
b) in our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c) the standalone financial statements dealt with by this report are in agreement withthe books of account;
d) in our opinion the aforesaid standalone financial statements comply with Ind ASspecified under section 133 of the Act;
e) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on March 312019 from being appointed as a director in terms of section 164(2) of the Act;
f) we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on March 31 2019 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated May 16 2019 as per Annexure B expressed an unmodified opinion; and
g) 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 as detailed in note 41 to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position as at March 312019;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at March 31 2019;
iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended March 312019; and
iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from November 8 2016 to December 30 2016which are not relevant to these standalone financial statements. Hence reporting underthis clause is not applicable.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 99514
Date: May 16 2019
Annexure A to the Independent Auditor's Report of even date to the members of LT FoodsLimited on the standalone financial statements for the year ended March 31 2019
Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed assetsunder which fixed assets are verified in a phased manner over a period of three yearswhich in our opinion is reasonable having regard to the size of the Company and thenature of its assets. In accordance with this program certain fixed assets were verifiedduring the year and no material discrepancies were noticed on such verification.
(c) The title deeds of all the immovable properties (which are included under the headProperty plant and equipment') are held in the name of the Company.
(ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year except for goods-in-transit and stocks lying withthird parties. For stocks lying with third parties at the year-end written confirmationshave been obtained by the management. No material discrepancies were noticed on theaforesaid verification.
(iii) The Company has granted unsecured loan to one company Genoa Rice Mills PrivateLimited a joint venture with Future Consumer Limited covered in the register maintainedunder Section 189 of the Act; and with respect to the same:
(a) in our opinion the terms and conditions of grant of such loans are not primafacie prejudicial to the Company's interest; and
(b) the schedule of repayment of principal and payment of interest has been stipulatedand the repayment/receipts of the principal amount and the interest are regular; and
(c) there is no overdue amount in respect of loans granted to such company.
(iv) In our opinion the Company has complied with the provisions of Section 186 inrespect of investments loans and guarantees. Further in our opinion the Company has notentered into any transaction covered under Section 185 and Section 186 of the Act inrespect of security.
(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) The Central Government has not specified maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's products. Accordinglythe provisions of clause 3(vi) of the Order are not applicable.
(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of customs duty of excise valueadded tax cess and other material statutory dues as applicable have generally beenregularly deposited to the appropriate authorities except advance income tax wheresignificant delays in deposit have occurred during the year. Further no undisputedamounts payable in respect thereof were outstanding at the year-end for a period of morethan six months from the date they became payable.
(b) The dues outstanding in respect of income-tax sales-tax service-tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:
|Name of the statute ||Nature of dues ||Amount (` in lakhs) ||Amount paid under Protest ( ` in lakhs ) ||Period to which the amount relates (Financial Year) ||Forum where dispute is pending |
|Income-tax Act 1961 ||Income tax demands ||57.54 ||- ||2002-03 ||Income tax Appellate Tribunal (ITAT') |
|Income-tax Act 1961 ||Income tax demands ||4.84 ||- ||2006-07 ||ITAT |
|Income-tax Act 1961 ||Income tax demands ||327.62 ||850.00 ||2007-08 ||ITAT |
|Income-tax Act 1961 ||Income tax demands ||235.95 ||223.95 ||2008-09 ||ITAT |
|Income-tax Act 1961 ||Income tax demands ||346.01 ||103.38 ||2009-10 ||ITAT |
|Income-tax Act 1961 ||Income tax demands ||142.68 ||19.50 ||2011-12 ||ITAT |
|Income-tax Act 1961 ||Income tax demands ||175.61 ||108.16 ||2012-13 ||ITAT |
|Income-tax Act 1961 ||Income tax demands ||769.75 ||200.00 ||2013-14 ||Commissioner of Income Tax (Appeals) (CIT(A)) |
|Income-tax Act 1961 ||Penalty ||36.27 ||36.27 ||1998-99 ||CIT(A) |
|Income-tax Act 1961 ||Penalty ||177.42 ||10.00 ||2009-10 ||CIT(A) |
|Income-tax Act 1961 ||Income tax demands ||19.36 ||- ||2015-16 ||CIT(A) |
(viii) The Company has not defaulted in repayment of loans or borrowings to any bankduring the year. The Company did not have any outstanding debentures or loans or borrowingpayable to any financial institution or government during the year.
(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments) and did not have any term loans outstanding during theyear. Accordingly the provisions of clause 3(ix) of the Order are not applicable.
(x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.
(xi) Managerial remuneration has been paid and provided by the Company in accordancewith the requisite approvals mandated by the provisions of Section 197 of the Act readwith Schedule V to the Act.
(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.
(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable Ind AS.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.
(xv) In our opinion the Company has not entered into any non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 99514
Date: May 16 2019
Annexure B to the Independent Auditor's Report of even date to the members of LT FoodsLimited on the standalone financial statements for the year ended March 31 2019
Independent Auditor's report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
1. In conjunction with our audit of the standalone financial statements of LT FoodsLimited ("the Company") as of and for the year ended March 31 2019 we haveaudited the internal financial controls over financial reporting (IFCoFR) of the Companyas of that date.
Management's Responsibility for Internal Financial Controls
2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting (the Guidance Note') issued by the Institute of Chartered Accountants ofIndia (the ICAI'). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of the company's business including adherenceto company's policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.
3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theICAI and deemed to be prescribed under section 143(10) of the Act to the extentapplicable to an audit of IFCoFR and the Guidance Note issued by the ICAI. Those Standardsand the Guidance Note require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether adequate IFCoFR wereestablished and maintained and if such controls operated effectively in all materialrespects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR included obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's IFCoFR.
Meaning of Internal Financial Controls over Financial Reporting
6. A company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sIFCoFR includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of theCompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.
8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at March 31 2019 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note issued by the ICAI.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 99514
Date: May 16 2019