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Milkfood Ltd.

BSE: 507621 Sector: Agri and agri inputs
NSE: N.A. ISIN Code: INE588G01013
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NSE 05:30 | 01 Jan Milkfood Ltd
OPEN 509.95
PREVIOUS CLOSE 493.00
VOLUME 678
52-Week high 605.00
52-Week low 241.00
P/E 19.87
Mkt Cap.(Rs cr) 241
Buy Price 484.15
Buy Qty 20.00
Sell Price 505.00
Sell Qty 10.00
OPEN 509.95
CLOSE 493.00
VOLUME 678
52-Week high 605.00
52-Week low 241.00
P/E 19.87
Mkt Cap.(Rs cr) 241
Buy Price 484.15
Buy Qty 20.00
Sell Price 505.00
Sell Qty 10.00

Milkfood Ltd. (MILKFOOD) - Auditors Report

Company auditors report

To the Members of Milkfood Limited

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalone financial statements of Milkfood Limited("the Company") which comprise the Balance Sheet as at March 31 2019 theStatement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date and asummary of the significant accounting policies and other explanatory information(hereinafter referred to as "the standalone financial statements"). 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 theCompanies Act 2013 ("the Act") in the manner so required and give a true andfair view in conformity with the Indian Accounting Standards prescribed under section 133of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended("IndAS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2019 the profit and total comprehensiveincome changes in equity and its cash flows for the year ended on that date.

Emphasis of matter:

Attention is drawn to the Note no 3(iv) regarding depreciation on casein plant Note no4 regarding biological assets Note no 6(i) & (ii) regarding trade receivable Note no7(i) regarding security deposits Note no 7(ii) & 10(i) regarding amount due fromemployees Note no 8(iii) regarding insurance claim receivable Note no 9(i) regardingnon-moving stocks Note no 13(i) regarding advance to suppliers Note no 17(i) regardingclassification of security deposit received Note no 20(i) regarding MSME suppliers Noteno 27(i) regarding remuneration paid to KMP and Note no 30(iv) regarding rent paid torelated parties. Our opinion is not qualified in respect of these matters.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India(ICAI) together with the independentrequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the standalone 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 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. For each matter below our description of how our auditaddressed 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.

The Key Audit Matter How to the matter was addressed in our audit
The company operates in various states within India exposing it to a variety of different Central and State Laws regulations and interpretations thereof. In this regulatory environment there is an inherent risk of litigation and claims. Our procedures included:
Reviewing the outstanding litigations against the Company for consistency with the previous years. Enquire and obtain explanations for movement during the year.
Discussing the status of significant known actual and potential litigations with the Company's in-house officials and other senior management personnel who have knowledge of these matters and assessing their responses.
Consequently provisions and contingent liability disclosures may arise from direct and indirect tax proceedings legal proceedings including regulatory and other government/ department proceedings as well as investigations by authorities and commercial claims. At March 31 2019 the Company's contingent liabilities for legal matters were Rs. 116 Lakhs (refer Note to the standalone financial statement) and provision for legal matters aggregated Nil. The most significant contingent liability pertains to tax of Rs.71 Lakhs levied by u/s 47 of Rajasthan Sales Tax Act. 1994. The tax has been levied on account of non-deposit of sale tax by the consignment agent of the company. Department is of the view that liability of principal and agent is joint and several. Reading the latest correspondence between the Company and the various tax/legal authorities and review of correspondence with / legal opinions obtained by the management from external legal advisors where applicable for significant matters and considering the same in evaluating the appropriateness of the Company's provisions or disclosures on such matters.
Examining the Company's legal expenses and reading the minutes of the board meetings in order to ensure that all cases have been identified.
Management applies significant judgment in estimating the likelihood of the future outcome in each case when considering whether and how much to provide or in determining the required disclosure for the potential exposure of each matter. This is due to the highly complex nature and magnitude of the legal matters involved along with the fact that resolution of tax and legal proceedings may span over multiple years and may involve protracted negotiation or litigation. With respect to tax matters involving our tax specialists and discussing with the Company's tax officers their views and strategies on significant cases as well as the related technical grounds relating to their conclusions based on applicable tax laws.
These estimates could change substantially overtime as new facts emerge as each legal case progresses. Given the inherent complexity and magnitude of potential exposures across the Company and the judgment necessary to estimate the amount of provisions required or to determine required disclosures this is a key audit matter. Assessing the decisions and rationale for provisions held or for decisions not to record provisions or make disclosures. For those matters where management concluded that no provisions should be recorded considered the adequacy and completeness of the Company's disclosures.
To comply with Pollution Control measures company has obtained consent for discharge of water for cultivation of Eucalyptus trees. The amount spent is of Rs. 24 Lakhs in this year and Rs. 219 Lakhs up to March 31 2019. Company has capitalized the same under Biological Assets within meaning of Ind AS 41. It is certified by the agriculture scientist that the realizable value on sale of these trees would not be less than the cost incurred. There is uncertainty of realization on sale of trees. Hence it is considered as a Key Matter. We have performed adequate procedures and have perused various documents of authorities and other supporting documents for incurring of expenditures. Regarding realisation of the amount we have relied upon the certificate of the expert. (Refer Note no 4 of the Standalone financial statement).

Information Other than the Standalone Financial Statements and Auditor's Report Thereon

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

Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.

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

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 Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone 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. The Board of Directors are responsible for overseeingthe Company's financial reporting process.

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

Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

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

Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management's use of the going concernbasis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.

Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit. We alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the "Annexure A" a statement on thematters specified in the paragraph 3 and 4 of the order.

2. With respect to matter to be included in the Auditors report under section197(16) of the Act:

In our opinion and according to the information and explanations given to us theCompany has not paid/provided any managerial remuneration to its directors for the yearended March 31 2019.Therfore provision of section 197 (16) are not applicable.

3. 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 thebest of 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 othercomprehensive income statement of changes in equity and the statement of cash flow dealtwith by this Report are in agreement with the books of account;

(d) in our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act.

(e) on the basis of the written representations received from the directors as on31 March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 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 and the operating effectiveness of such controls refer to ourseparate report in "Annexure B"; 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 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 on its financialposition in its financial statements;

ii. the Company did not have any long term contracts including derivative contractsfor which there were any material foreseeable losses;

iii. there were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

for V. P. Jain & Associates
Chartered Accountants
Firm's registration number: 015260N
Sarthak Madaan
Place: New Delhi Partner
Date: 24th May 2019 Membership number: 547131

Annexure - A to the Auditors' Report

The Annexure referred to in Independent Auditors' Report to the members of the MilkfoodLimited("the company") on the standalone financial statements for the yearended 31 March 2019 we report that:

(i) In respect of fixed assets:

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

(b) The Company has a programme of verification of fixed assets to cover all theitems in a phased manner over a period of three years which in our opinion isreasonable having regard to the size of the company and the nature of its assets. Pursuantto the said programme certain fixed assets were physically verified by the Managementduring the year. According to the information and explanations given to us no materialdiscrepancies were noticed on such verification.

(c) According to the information and explanations given to us and on the basis ofour examination of the records of the Company and certificate provided by the bank thetitle deeds of immovable properties are held in the name of the Company. Original copy oftitle deed has not been produced as the same is deposited as security with bank under loanagreement as confirmed by the management & Bank.

(ii) In respect of its inventories:

(a) As explained to us inventories have been physically verified during the yearby the Management at reasonable intervals other than stock lying with third parties wherecertificates confirming physical inventory have been received.

(b) In our opinion and according to the information and explanations given to usthe procedures of physical verification of inventories followed by the Management werereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(c) In our opinion and according to the information and explanations given to usthe Company has maintained proper records of its inventories and no material discrepancieswere noticed on physical verification.

(iii) The Company has granted loans to party covered in the register maintainedunder section 189 of the Companies Act 2013 (‘the Act'). The terms and conditionsfor grant of such loan is not prejudicial to the interest of company. However stipulationfor repayment is not laid out. Company is in regular receipt of interest.

(iv) In our opinion and according to the information and explanations given to usthe Company has not given any loans and made any investment within the meaning of section185 & 186 of the Act. Thus paragraph 3(iii) of the Order is not applicable to theCompany.

(v) According to the information and explanation given to us the company has notaccepted any deposits during the year.

Company is of the view that provision of Section 74(1)(b) of the Act are complied within pursuance of Rule 19 of the Acceptance of Deposits Rules 2014. It is also confirmed bythe company that no order has been passed by the Company Law Board or National Company LawTribunal or Reserve Bank of India or any court or any other tribunal.

(vi) According to the information and explanations given to us and on the basis ofour review of the cost records maintained by the Company pursuant to the Companies (CostAccounting Records) Rules 2014 prescribed by the Central Government under Section 148(1)of the Companies Act 2013 we are of the opinion that prima facie the prescribed costrecords have been maintained. We have however not made a detailed examination of therecords with a view to determining whether they are accurate or complete.

(vii) In respect of statutory dues:

(a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company the company has generally been regular indepositing undisputed statutory dues including provident Fund Employees State insuranceincome tax GST sales tax wealth tax service tax duty of customs duty of excisevalue added tax cess and other material statutory dues applicable to it with theappropriate authorities.

There were no undisputed amounts payable in respect of the aforesaid statutory dues inarrears as at 31.03.2019 for a period of more than six months from the date they becamepayable.

(b) According to the information and explanations given to us there are no dues ofincome tax GST sales tax wealth tax service tax duty of customs duty of excisevalue added tax cess which have not been deposited as at 31.03.2019 on account of anydispute except as follows:

Name of Statute Nature of Dues Amount Forum where dispute
Rs/lakhs is pending
1 U.P. Vat Act 2008 Regular demand for Assessment year 2016-17 37.24 Before Addl. Commissioner (Appeals) Moradabad.

(viii) According to the information and explanations given to us the Company hasnot defaulted in repayment of loans or borrowing to a financial institution bankGovernment during the year.

(ix) In our opinion and according to the information and explanation given to usthe term loans have been applied by the company during the year for the purposes for whichthey were obtained.

(x) According to the information and explanations given to us no material fraud bythe Company or on the Company by its officers or employees has been noticed or reportedduring the course of our audit.

(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not paid/provided anymanagerial remuneration within the meaning of section 197 read with Schedule V to the Act.

(xii) In our opinion and according to the information and explanations given to usthe Company is not a nidhi company.

Accordingly paragraph 3(xii) of the Order is not applicable.

(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 by the applicableaccounting standards. (xiv) According to the information and explanations given tous and based on our examination of the records of the Company the Company has not madeany preferential allotment or private placement of shares or fully or partly convertibledebentures during the year.

(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 non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.

(xvi) The Company is not required to be registered under section 45-IA of theReserve Bank of India Act 1934.

for V. P. Jain & Associates
Chartered Accountants
Firm's registration number: 015260N
Sarthak Madaan
Place: New Delhi Partner
Date: 24th May 2019 Membership number: 547131

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 MilkfoodLimited("the Company") as of 31 March 2019 in conjunction with our audit ofthe standalone 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 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.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. 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 auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness.

Our audit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls 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 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

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

for V. P. Jain & Associates
Chartered Accountants
Firm's registration number: 015260N
SarthakMadaan
Place: New Delhi Partner
Date: 25th May 2018 Membership number: 547131