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Meghmani Organics Ltd.

BSE: 532865 Sector: Agri and agri inputs
NSE: MEGH ISIN Code: INE974H01013
BSE 00:00 | 20 Feb 59.95 1.90
(3.27%)
OPEN

59.50

HIGH

61.65

LOW

58.10

NSE 00:00 | 20 Feb 59.95 1.75
(3.01%)
OPEN

60.00

HIGH

61.65

LOW

58.15

OPEN 59.50
PREVIOUS CLOSE 58.05
VOLUME 317901
52-Week high 73.00
52-Week low 40.60
P/E 9.14
Mkt Cap.(Rs cr) 1,525
Buy Price 59.10
Buy Qty 498.00
Sell Price 59.95
Sell Qty 2016.00
OPEN 59.50
CLOSE 58.05
VOLUME 317901
52-Week high 73.00
52-Week low 40.60
P/E 9.14
Mkt Cap.(Rs cr) 1,525
Buy Price 59.10
Buy Qty 498.00
Sell Price 59.95
Sell Qty 2016.00

Meghmani Organics Ltd. (MEGH) - Auditors Report

Company auditors report

To the Members of

Meghmani Organics Limited.

Report on the Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying standalone Ind AS financial statements of MeghmaniOrganics Limited Company Limited ("the Company") which comprise the Balancesheet as at March 31 2019 the Statement of Profit and Loss including the statement ofOther Comprehensive Income the Cash Flow Statement and the Statement of Changes in Equityfor the year then ended and notes to the financial statements including a summary ofsignificant accounting policies and other explanatory information. (hereinafter referredto as the standalone Ind AS financial statements).

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 312019its profit including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the ‘Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' section ofour report. We are independent of the Company in accordance with the ‘Code of Ethics'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 audit opinion on the standalone Ind AS financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone Ind AS financial statements for the financialyear ended March 312019. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. For each matter below ourdescription of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the standalone Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the standalone Ind AS financial statements. The results of ouraudit procedures including the procedures performed to address the matters below providethe basis for our audit opinion on the accompanying standalone Ind AS financialstatements.

Key audit matters How our audit addressed the key audit matter
Revenue recognition
(as described in note 2(b) of the standalone Ind AS financial statements)
The Company majorly operates in two segments viz: Agro chemicals and Pigment. Our audit procedures included the following:
Export sales contributes approximately 77% of total sales of the Company. The Company recognises revenue from sales of goods in accordance with the requirements of Ind AS 115 Revenue from Contracts with Customers measured at fair value of the consideration received in the ordinary course of the Company's activities. • Understood the Company's established processes and control mechanism for revenue recognition process evaluated the key financial controls around such process.
Revenue from sale of goods is recognised net of discounts rebates and taxes. Certain terms in sales arrangements relating to timing of transfer of risk and rewards discount and rebates arrangements delivery specifications including incoterms involves significant judgment in determining whether the revenue is recognised in the correct period. • Performed test of controls assisted by our IT specialists over revenue recognition with specific focus on testing management controls on accuracy and timing of revenue recognition through inspection of evidence of performance of management controls.
• Performed tests of details on a sample basis and inspected the underlying sales order invoice copy terms of delivery lorry receipt bill of lading invoice collection to assess whether revenue recorded is as per the contract.
• Considered the appropriateness of the Company's revenue recognition accounting policies in terms of Ind AS 115.
• Tested sales transactions near year end date as well as credit notes issued after the year end date.
• Performed product-wise and customer-wise substantive analytical procedures on revenue recognition.
• Verified that the revenue for the year are appropriately presented and disclosed in the standalone Ind AS financial statements.

Other Information

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the management discussion and analysisand chairman statement but does not include the standalone Ind AS financial statementsand our auditor's report thereon.

Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.

Responsibilities of Management for the Standalone Ind AS Financial Statements

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 Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe 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 the 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 standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone Ind AS 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 standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• 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 system in place and the operating effectiveness ofsuch 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 standalone IndAS financial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves 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 standalone Ind AS financialstatements for the financial year ended March 31 2019 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.

Report on Other Legal and Regulatory Requirements

1. 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 Act we give in the "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order.

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

(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;

(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;

(c) The Balance Sheet the Statement of Profit and Loss including the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;

(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended;

(e) On the basis of the written representations received from the directors as on March31 2019 and taken on record by the Board of Directors none of the directors isdisqualified as on March 312019 from being appointed as a director in terms of Section164 (2) of the Act;

(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these standalone Ind AS financial statementsand the operating effectiveness of such controls refer to our separate Report in"Annexure 2" to this report;

(g) In our opinion the managerial remuneration for the year ended March 312019 hasbeen paid/provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;

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

I. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements-Refer Note 39 to the standalone IndAS financial statements;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and

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

For S R B C & CO LLP

Chartered Accountants

ICAI Firm Registration Number: 324982E/E300003

per Sukrut Mehta

Partner

Membership Number: 101974

Place of Signature: Ahmedabad

Date: May 24 2019.

Annexure 1

Referred to in Paragraph 1 of Report on Other Legal and Regulatory Requirements of ourreport of even date of Meqhmani Organics Limited for the year ended March 31 2019.

i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Property Plant and Equipment.

(b) All Property Plant and Equipment have not been physically verified by themanagement during the year. However there is a regular programme of verification once inthree years which in our opinion is reasonable having regard to the size of the Companyand the nature of its assets. No material discrepancies were noticed on such verificationcarried out in accordance with aforesaid plan.

(c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment are held in thename of the Company except for one freehold land aggregating to INR 558.40 lakhs as atMarch 31 2019 for which title deeds are not registered in the name of the Company.

ii. The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on such physicalverification.

iii. According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii) (a)(b) and (c) of theOrder are not applicable to the Company and hence not commented upon.

iv. In our opinion and according to the information and explanations given to usprovisions of section 186 of the Act in respect of investments made and guarantees givenhave been complied with by the Company. Further in our opinion and according to theinformation and explanations given to us since there are no loans and securities given inrespect of which provisions of section 185 and 186 of the Act are applicable and hence notcommented upon.

v. The Company has not accepted any deposits within the meaning of Sections 73 to 76 ofthe Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended). Accordinglythe provisions of clause 3(v) of the Order are not applicable and hence not commentedupon.

vi. We have broadly reviewed the books of account maintained by the Company pursuant tothe rules made by the Central Government for the maintenance of cost records under section148(1) of the Companies Act 2013 related to the manufacture of agrochemicals and pigmentproducts and are of the opinion that prima facie the specified accounts and records havebeen made and maintained. We have not however made a detailed examination of the same.

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 duty of custom goods and service tax cess and other statutorydues are generally regularly deposited with the appropriate authorities though there hasbeen a slight delay in a few cases.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax service taxduty of custom good and service tax cess and other statutory dues were outstanding atthe year end for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us there are no dues ofincome tax sales tax service tax duty of customs duty of excise and value added taxwhich have not been deposited with the appropriate authorities on account of any disputeexcept for the following:

Annexure 1

Referred to in Paragraph 1 of Report on Other Legal and Regulatory Requirements of ourreport of even date of Meqhmani Organics Limited for the year ended March 31 2019.

Name of statue Nature of dues Amount involved (INR lakhs) Period Forum where the dispute is pending
Central Excise Act Excise duty demand 1938.69 2002-03 to 2008-09 and 2011-12 to 2015-16 Gujarat Highcourt Central Excise and Service Tax Appellate Tribunal Commissioner (Appeals)
Custom Act 1962 Custom Duty 1399.48 2016-17 Commissioner of Customs
The Finance Act (Service Tax) 1994 Service Tax 43.00 2004-05 to 2015-16 Central Excise and Service Tax Appellate Tribunal Commissioner (Appeals)
Income tax Act 1961* Income tax demands 2002-03 2007-08 to 2009-10 2012-13 to 2014-15 Gujarat High Court Income tax Apellate Tribunal Commissioner Appeals Income tax

* Net of amount paid under protest amounting to INR 173.84 lakhs and adjustment of theamount of Income tax refunds pertaining to other assessment years amounting to INR 851.15lakhs.

viii. In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowings from banks.The Company did not have any due payable to the financial institutions debenture holdersand government during the year.

ix. According to the information and explanations given by the management the Companyhas utilized the monies raised by way of term loans for the purposes for which they wereraised. The Company has not raised money by way of initial public offer further publicoffer and debt instrument during the year.

x. Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the Company or no fraud on the Companyby the officers and employees of the Company has been noticed or reported during the year.

xi. According to the information and explanations given by the management themanagerial remuneration has been paid/provided in accordance with the requisite approvalsmandated by the provisions of section 197 read with Schedule V to the Companies Act 2013.

xii. In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the order are not applicable to the Company and hence not commented upon.

xiii. According to the information and explanations given by the management on certaintransactions entered with related parties being of specialized nature transaction withthe related parties are in compliance with section 177 and 188 of Companies Act 2013where applicable and the details have been disclosed in the notes to the Ind AS financialstatements as required by the applicable accounting standards.

xiv. According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe Company and not commented upon.

xv. According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in section 192 of the Act.

xvi. According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.

For S R B C & CO LLP

Chartered Accountants

ICAI Firm Registration Number: 324982E/E300003

per Sukrut Mehta

Partner

Membership Number: 101974

Place of Signature: Ahmedabad

Date: May 24 2019.

Annexure 2

To the Independent Auditor's Report of even date on the Ind AS financial statements ofMeqhmani Organics Limited

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 MeghmaniOrgancis Limited ("the Company") as of March 312019 in conjunction with ouraudit of the Ind AS 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these standalone financial statementsbased on our audit. We conducted our audit in accordance with the Guidance Note on Auditof Internal Financial Controls Over Financial Reporting (the "Guidance Note")and the Standards on Auditing as specified under section 143(10) of the Act to theextent applicable to an audit of internal financial controls and both issued by theInstitute of Chartered Accountants of India. Those Standards and the Guidance Note requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting with reference to these standalone financial statements 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 over financial reporting with reference to thesestandalone financial statements and their operating effectiveness. Our audit of internalfinancial controls over financial reporting included obtaining an understanding ofinternal financial controls over financial reporting with reference to these standalonefinancial statements assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the Ind AS financial statementswhether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the internal financial controls over financialreporting with reference to these standalone financial statements.

Meaning of Internal Financial Controls Over Financial Reporting with reference to withreference to these standalone financial statements

A company's internal financial control over financial reporting with reference to thesestandalone financial statements is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accountingprinciples. A company's internal financial control over financial reporting with referenceto these standalone financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.

Annexure 2

To the Independent Auditor's Report of even date on the Ind AS financial statements ofMeqhmani Organics Limited

Inherent Limitations of Internal Financial Controls Over Financial Reporting withreference to these standalone financial statements

Because of the inherent limitations of internal financial controls over financialreporting with reference to these standalone financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over with reference to these standalonefinancial statements future periods are subject to the risk that the internal financialcontrol over financial reporting with reference to these standalone financial statementsmay become inadequate because of changes in conditions or that the degree of compliancewith the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls over financial reporting with reference to these standalone financialstatements and such internal financial controls over financial reporting with reference tothese standalone financial statements were operating effectively as at March 31 2019based on the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.

For S R B C & CO LLP

Chartered Accountants

ICAI Firm Registration Number: 324982E/E300003

per Sukrut Mehta

Partner

Membership Number: 101974

Place of Signature: Ahmedabad

Date: May 24 2019.