To the Members of Milkfood Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Milkfood Limited (the Company) which comprise the Balance Sheet as at March 31 2019 the Statement of Profit and Loss (including Other Comprehensive Income) the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as the standalone financial statements). In our opinion and to the best of our information and according to the explanations given to us the aforesaid standalone financial statements give the information required by the Companies Act 2013 (the Act) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended (IndAS) and other accounting principles generally accepted in India of the state of affairs of the Company as at March 31 2019 the profit and total comprehensive income 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 no 4 regarding biological assets Note no 6(i) & (ii) regarding trade receivable Note no 7(i) regarding security deposits Note no 7(ii) & 10(i) regarding amount due from employees Note no 8(iii) regarding insurance claim receivable Note no 9(i) regarding non-moving stocks Note no 13(i) regarding advance to suppliers Note no 17(i) regarding classification of security deposit received Note no 20(i) regarding MSME suppliers Note no 27(i) regarding remuneration paid to KMP and Note no 30(iv) regarding rent paid to related 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 the Standards on Auditing specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India(ICAI) together with the independent requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to 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 most significance 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 financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. For each matter below our description 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 be communicated in our report. We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the standalone Ind AS financial statements section of our report including in relation to these matters. Accordingly our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone Ind AS financial statements. The results of our audit procedures including the procedures performed to address the matters below provide the basis for our audit opinion on the accompanying standalone Ind AS financial statements.
|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 other information. The other information comprises the information included in the Management Discussions and Analysis Board's Report including Annexures to Board's Report Business Responsibility Report Corporate Governance and Shareholder's Information but does not include the standalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained 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 material misstatement 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 section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position financial performance total comprehensive income changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so. The Board of Directors are responsible for overseeing the 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 standalone financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial controls relevant to the audit in order to design 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 has adequate internal financial controls system in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the standalone 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's report. However future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone financial statements including the disclosures and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statements that individually or in aggregate makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be 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 (the Order) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act we give in the Annexure A a statement on the matters specified in the paragraph 3 and 4 of the order.
2. With respect to matter to be included in the Auditors report under section 197(16) of the Act:
In our opinion and according to the information and explanations given to us the Company has not paid/provided any managerial remuneration to its directors for the year ended 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 the best 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 the Company so far as it appears from our examination of those books;
(c) the balance sheet the statement of profit and loss including other comprehensive income statement of changes in equity and the statement of cash flow dealt with by this Report are in agreement with the books of account;
(d) in our opinion the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act.
(e) on the basis of the written representations received from the directors as on 31 March 2019 taken on record by the Board of Directors none of the directors is disqualified as on 31 March 2019 from being appointed as a director in terms of Section 164 (2) of the Act;
(f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls refer to our separate report in Annexure B; and
(g) with respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and 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 financial position in its financial statements;
ii. the Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses;
iii. there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
|for V. P. Jain & Associates|
|Firm's registration number: 015260N|
|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 Milkfood Limited(the company) on the standalone financial statements for the year ended 31 March 2019 we report that:
(i) In respect of fixed assets:
(a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.
(b) The Company has a programme of verification of fixed assets to cover all the items in a phased manner over a period of three years which in our opinion is reasonable having regard to the size of the company and the nature of its assets. Pursuant to the said programme certain fixed assets were physically verified by the Management during the year. According to the information and explanations given to us no material discrepancies were noticed on such verification.
(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company and certificate provided by the bank the title deeds of immovable properties are held in the name of the Company. Original copy of title deed has not been produced as the same is deposited as security with bank under loan agreement as confirmed by the management & Bank.
(ii) In respect of its inventories:
(a) As explained to us inventories have been physically verified during the year by the Management at reasonable intervals other than stock lying with third parties where certificates confirming physical inventory have been received.
(b) In our opinion and according to the information and explanations given to us the procedures of physical verification of inventories followed by the Management were reasonable and adequate in relation to the size of the Company and the nature of its business.
(c) In our opinion and according to the information and explanations given to us the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.
(iii) The Company has granted loans to party covered in the register maintained under section 189 of the Companies Act 2013 (`the Act'). The terms and conditions for grant of such loan is not prejudicial to the interest of company. However stipulation for 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 us the Company has not given any loans and made any investment within the meaning of section 185 & 186 of the Act. Thus paragraph 3(iii) of the Order is not applicable to the Company.
(v) According to the information and explanation given to us the company has not accepted any deposits during the year.
Company is of the view that provision of Section 74(1)(b) of the Act are complied with in pursuance of Rule 19 of the Acceptance of Deposits Rules 2014. It is also confirmed by the company that no order has been passed by the Company Law Board or National Company Law Tribunal 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 of our review of the cost records maintained by the Company pursuant to the Companies (Cost Accounting 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 cost records have been maintained. We have however not made a detailed examination of the records 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 of our examination of the records of the Company the company has generally been regular in depositing undisputed statutory dues including provident Fund Employees State insurance income tax GST sales tax wealth tax service tax duty of customs duty of excise value added tax cess and other material statutory dues applicable to it with the appropriate authorities.
There were no undisputed amounts payable in respect of the aforesaid statutory dues in arrears as at 31.03.2019 for a period of more than six months from the date they became payable.
(b) According to the information and explanations given to us there are no dues of income tax GST sales tax wealth tax service tax duty of customs duty of excise value added tax cess which have not been deposited as at 31.03.2019 on account of any dispute except as follows:
|Name of Statute||Nature of Dues||Amount||Forum where dispute|
|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 has not defaulted in repayment of loans or borrowing to a financial institution bank Government during the year.
(ix) In our opinion and according to the information and explanation given to us the term loans have been applied by the company during the year for the purposes for which they were obtained.
(x) According to the information and explanations given to us no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit.
(xi) According to the information and explanations given to us and based on our examination of the records of the Company the Company has not paid/provided any managerial 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 us the 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 our examination of the records of the Company transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards. (xiv) According to the information and explanations given to us and based on our examination of the records of the Company the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.
(xv) According to the information and explanations given to us and based on our examination of the records of the Company the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly paragraph 3(xv) of the Order is not applicable.
(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.
|for V. P. Jain & Associates|
|Firm's registration number: 015260N|
|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 Section 143 of the Companies Act 2013 (the Act)
We have audited the internal financial controls over financial reporting of Milkfood Limited(the Company) as of 31 March 2019 in conjunction with our audit of the 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 internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (`ICAI'). These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the Guidance Note) and the Standards on Auditing issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013 to the extent applicable to an audit of internal financial controls both applicable to an audit of Internal Financial Controls and both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness.
Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgment including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's internal financial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition use or disposition of the company'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 financial reporting including the possibility of collusion or improper management override of controls material misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2019 based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
|for V. P. Jain & Associates|
|Firm's registration number: 015260N|
|Place: New Delhi||Partner|
|Date: 25th May 2018||Membership number: 547131|