INDEPENDENT AUDITOR'S REPORT
To the Members of MANGALAM DRUGS & ORGANICS LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of Mangalam Drugs and OrganicsLimited ("the Company") which comprise the Balance Sheet as at 31st March2020 the statement of Profit and Loss (statement of changes in equity) and statement ofCash Flows for the year then ended and notes to the financial statements including asummary of significant accounting policies and other explanatory information. In ouropinion and to the best of our information and according to the explanations given to usthe aforesaid standalone financial statements give the information required by the Act inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at March31 2020 and profit (changes in equity) and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs)specifiedundersection 143(10) of the Companies Act 2013. Our responsibilities under those Standards arefurther described in the Auditor's Responsibilities for the Audit of the FinancialStatements section of our report.
We are independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India together with the ethical requirements thatare relevant to our audit of the financial statements under the provisions of theCompanies Act 2013 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 opinion.
Emphasis of Matter Paragraph
1. We refer note number 42 to the Standalone Financial Statements of the Companywherein financial impact of COVID-19 on the operations of the Company has been disclosed.Future operations of the Company will be subject to developments on COVID-19 fronttogether with stability in the economy which are currently uncertain.
2. Due to the prevailing lockdown and restrictions over travelling Company has notbeen able to obtain the actuarial valuation report from the actuary towards the Gratuityand Leave encashment and accordingly the said liabilities have been providedproportionately based on the previous year actuarial reports. The impact of the same onthe profit for the current year is not ascertainable but the Management is of the opinionthat there would not be any material impact.
3. Balances of debtors/creditors/loans and advances are subject to confirmation andreconciliation. Management has confirmed that the final impact upon reconciliation wouldnot be material.
Our opinion is not modified 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 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.
Key Audit Matter: Revenue Recognition
Revenue from sale of pharmaceutical products is recognised when the control over theproducts have been transferred to the customer based on the terms and conditions of thesales contracts entered into with the customers across geographies.
We have identified recognition of revenue as a key audit matter as revenue is a keyperformance indicator and there is a risk of revenue being overstated arising frompressure to achieve performance targets as well as meeting external expectations.
Our procedures included but were not limited to the following:
1. Assessing the appropriateness of the revenue recognition accounting policies bycomparing with applicable accounting standards.
2. Testing the design implementation and operating effectiveness of the Company'sgeneral IT controls and key IT application/manual controls over the Company's systemswhich govern recording of revenue in the general ledger accounting system.
3. Performing substantive testing (including year-end cut-off testing) by selectingsamples of revenue transactions recorded during the year (and before and after thefinancial year) and verifying the underlying documents which includes salesinvoices/contracts and shipping documents.
4. Assessing manual journals posted to revenue to identify unusual items other thanalready identified. Evaluating the adequacy of the standalone financial statementdisclosures including disclosures of key assumptions judgements and sensitivities
Information other than the Financial Statements and Auditor's Report thereon
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.
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 thefinancial statements our responsibility is to read the other information and in doingso consider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. 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 have nothing to report in this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters 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 (changes in equity) and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theaccounting Standards specified under section 133 of the Act.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statement that give a true and fair view and are free from materialmisstatement whether due to fraud or error. In preparing the financial statementsmanagement is responsible for assessing the Company's ability to continue as a goingconcern disclosing as applicable matters related to going concern and using the goingconcern basis of accounting unless management either intends to liquidate the Company orto cease operations or has no realistic alternative but to do so. Those Board ofDirectors are also responsible for overseeing the Company's financial reporting process.
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:
1. Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theCompanies Act 2013 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.
3. Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
4. Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Company's abilityto continue as a going concern. If we conclude that a material uncertainty exists we arerequired to draw attention in our auditor's report to the related disclosures in thefinancial statements or if such disclosures are inadequate to modify our opinion. Ourconclusions 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.
5. 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 findings including any significantdeficiencies 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 ourauditor's 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.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the "Annexure A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
As required by Section 143(3) of the Act we report that:
1. 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.
2. 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 and proper returnsadequate for the purposes of our audit have been received from the Units not visited byus.
3. The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of accounts.
4. In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
5. On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2020 from being appointed as a director in terms of Section164 (2) of the Act.
6. 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 B".
7. 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 in our opinionand to the best of our information and according to the explanations given to us:
The Company has disclosed the impact of pending litigations on its financial positionin its financial statements Refer Note 37 to the financial statements
The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
There were no amounts which were required to be transferred to the Investor Educationand Protection Fund by the Company.
Due to COVID-19 related lockdown we were not able to participate in physicalverification of cash and inventory that was carried out by management subsequent to theyear end. Consequently we have performed alternate audit procedures to audit theexistence of cash and inventory as per the guidance provided in SA 501 "AuditEvidence- Specific Consideration for selected items" and have obtained sufficientappropriate audit evidence to issue our unmodified opinion on these standalone financialresults.
The Annexure A referred to in Independent Auditors' Report to the members of theCompany on the financial statements for the year ended
31 March 2020 we report that:
(i) a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b) As explained to us the fixed assets have been physically verified by management atreasonable intervals under a phased programme of verification. In accordance with thisprogram we found a delay by the Management in conducting this exercise during the year.In our opinion the Management should carry out the pending exercise and update itsrecords.
c) The title deeds of the immovable properties as disclosed in schedule of fixed assetsto the financial are held in the name of the Company.
(ii) The physical verification of inventory has been conducted at reasonable intervalsby the management during the year. In respect of inventory lying with third parties thesehave substantially been confirmed by them. In our opinion the frequency of verificationdiscrepancies have been noticed on such verification.
Due to COVID-19 related lockdown we were not able to participate in physicalverification of inventory that was carried out by management subsequent to the year end.Consequently we have performed alternate audit procedures to audit the existence ofinventory as per the guidance provided in SA 501 "Audit Evidence- SpecificConsideration for selected items".
(iii) In our opinion and according to the information and explanation given to us theCompany has not granted any loans secured or unsecured to companies firms LimitedLiability Partnership or other parties covered in the register maintained under Section189 of the Act. Accordingly paragraph 3 (iii) (a) 3 (iii) (b) and 3 (iii) (c) of theorder are not applicable to the Company.
(iv) In our opinion and according to the information and explanations given to us theCompany has not granted any loans or provided any guarantees or security in respect of anyloans to any party covered under Section 185 of the Act. The Company has made noinvestments which are covered under provision of Section 186 of the Act. Hence the clauseis not applicable.
(v) The Company has not accepted any deposits from the public within the meaning ofSection 73 to 76 of the Act and Rules framed there under to extent notified.
(vi) We have broadly reviewed the books of accounts maintained by the company pursuantto the order made by the Central Government for maintenance of cost records prescribedunder sub-section 1 of section 148 of the Act and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. We have however not made adetailed examination of the said records with a view to determine whether they areaccurate or complete.
(vii) According to the information and explanations given to us and the records of theCompany examined by us in our opinion
a) the Company is generally regular in depositing the undisputed statutory duesincluding provident fund employee state insurance income tax sales tax service taxGST duty of customs duty of excise value added tax cess and any other materialstatutory dues as applicable with the appropriate authorities.
Further no undisputed amounts payable in respect of provident fund employee stateinsurance income tax sales tax service tax GST duty of customs duty of excise valueadded tax cess and any other material statutory dues were in arrears as at 31 March 2020for a period of more than six months from the date they became payable.
b) According to the information and explanations given to us and the records of thecompany examined by us the dues in respect of sales tax income-tax duty of customsservice tax GST entry tax value added tax central sales tax duty of excise whichhave not been deposited with the appropriate authority on account of any disputes are asunder:
|Sr. No ||Excise Duty Service Tax & GST ||Amount (Rs.in Lacs) ||Forum where dispute is pending |
|a) ||2011-2012 ||208.37 ||CESTAT AHMEDABAD |
|b) ||2015-2016 ||171.77 ||CESTAT BARODA |
|c) ||2019-2020 ||143.94 ||CESTAT BARODA |
| ||Total Amt (In Lakhs) (A) ||524.08 || |
|Sr. No ||INCOME TAX ||Amount (Rs.in Lacs) ||Forum where dispute is pending |
|a) ||AY-2002-2003 ||0.86 ||Income Tax appellant Tribubal Mumbai |
|b) ||AY-2003-2004 ||0.88 ||Income Tax appellant Tribubal Mumbai |
|d) ||AY-2006-2007 ||21.42 ||Commissioner of Income tax Appeals-IV Mumbai |
|e) ||AY-2011-12 ||56.14 ||Income Tax appellant Tribunal Mumbai has referred the matter to assessing officer |
| ||Total Amt.(In Lacs) (B) ||79.30 || |
| ||Sub Total Amt ||603.38 || |
(viii) According to the records of the company examined by us and the information andexplanation given to us the company has not defaulted in repayment of loans or borrowingsto any financial institution bank or Government as at the Balance sheet date.
(ix) The Company did not raise any moneys by way of initial public offer or furtherpublic offer (including debt instruments) nor has obtained any term loans during the yearhence paragraph 3 (ix) of the order is not applicable to the Company.
(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanation given to us we have neither come across anyinstances of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by themanagement.
(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/ provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required under Ind AS andCompanies Act 2013.
(xiv) According to the information and explanations give 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. Therefore paragraph 3(xiv) of the order is not applicable to the Company.
(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 directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable to the Company.
(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the order are notapplicable to the Company.
Annexure - B to the Auditors' Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of MangalamDrugs & Organics 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.
Management's Responsibility for Internal Financial Controls
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 (ICAI').Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.
Our responsibility is to express financial reporting based on our audit. Weconducted our opinion on the Company's internal financial controls over audit inaccordance with the Guidance Note on Audit of Internal Financial Controls over FinancialReporting (the "Guidance Note") and the Standards on Auditing issued by ICAIand deemed to be prescribed under section 143(10) of the Companies Act 2013 to theextent applicable to an audit of internal financial controls both applicable to an auditof Internal Financial Controls and both issued by the Institute of Chartered Accountantsof India. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion on the Company's internal financial controls system over financialreporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
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.
In our opinion and to the best of our information & according to the explanationsgive to us the Company has in all material respects an adequate internal financialcontrols system over financial reporting and such internal financial controls overfinancialreporting were operating effectively as at 31 March 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 Batliboi & Purohit |
| ||Chartered Accountants |
| ||Firm Registration Number:101048W |
| ||Parag Hangekar |
|Place: Mumbai ||Partner |
|Date: June 29 2020 ||Membership No. 110096 |
|UDIN: 20110096AAAACH4361 || |