TO THE MEMBERS OF MMP INDUSTRIES LIMITED
Report on Audit of the Standalone Financial Statements Opinion
We have audited the accompanying standalone financial statements of MMP INDUSTRIESLIMITED ("the Company") which comprises the Standalone Balance Sheet as at March31 2020 the Standalone Statement of Profit and Loss (including the OtherComprehensive Income) the Standalone Statement of Changes in Equity and the StandaloneStatement of Cash Flows and for the year then ended and notes to the standalone financialstatements including a summary of significant accounting policies and other explanatoryinformation (hereinafter referred to as "the standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us read with our comments in the Emphasis of Matter paragraph below theaforesaid standalone financial statements give the information required by the CompaniesAct 2013 ("the Act") in the manner so required and give a true and fair view inconformity with the Indian Accounting Standards prescribed under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended ("IndAS") and other accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2020 and its profit including totalcomprehensive income the changes in equity and its cash flows for the year ended on thatdate.
Basis of Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act. Our responsibilitiesunder those Standards are further described in the Auditor's Responsibilities for theAudit of the standalone financial statements section of our report. We are independent ofthe Company in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India ("ICAI") together with the ethical requirements that arerelevant to our audit of the standalone financial statements under the provisions of theAct and the Rules made thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the standalone financial statements.
Emphasis of Matter
We draw your attention to Note No. 45 to the standalone financial statements whichexplains the management's assessment of the financial impact due to lock down and otherrestrictions and conditions imposed in relation to COVID 19 pandemic situation for whicha definitive assessment impact in the subsequent period is highly dependent upon thecircumstances as they evolve. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were most ofsignificance in our audit of the standalone financial in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters. We have determined the matters describedbelow to be the key audit matters to be communicated to our report.
|The Key Audit Matters ||How was the matter addressed in our Audit |
|Revenue Recognition || |
|Revenue is one of the key profit drivers and is therefore susceptible to misstatements. Cut-off is the key assertion in so far as revenue recognition is concerned since an inappropriate cut-off can result in material misstatement of results for the years. ||Our audit procedures with regards to revenue recognition included testing controls automated and manual around dispatches / deliveries inventory reconciliations and circularization of receivable balances substantive testing for cut-off and analytical review procedures. |
|Capital Work-in-Progress / Property Plants and Equipment || |
|The Company had embarked on the project of setting up and construction of manufacturing plants in "UMRED". The Value of such Property Plants and Equipment capitalized during the period is Rs. 421879967. The projects need to be capitalized and depreciated once the assets are ready for use as intended by the management. Inappropriate timing of capitalization of the project and / or inappropriate classification of categories of items of Property Plants and Equipment could results in material misstatement of Capital Work-in-Progress / Property Plants and Equipment with a consequents impact on depreciation charge and results for the period. ||Our audit procedures included testing the design implementation and operating effectiveness of controls in respect of review of Capital Work-in-Progress particularly in respect of timing of the capitalization and recording of additions to items of various categories of PPE with source documentation substantive testing of appropriateness of the Cut-off date considered for project capitalization. |
| ||We tested the source documentation to determine whether the expenditure is of capital nature and has been appropriately approved and segregated into appropriate categories. We reviewed operating expenses to determine appropriateness of accounting. Further through sites visits we physically verified existence of Capital Work-in-Progress / Property Plants and Equipment. |
|Evaluation of Pending Tax Litigations || |
|The Company has pending litigation for demand in dispute under various tax statutes which involves significant judgements to determine the possible outcome of dispute. ||We have obtained the details of tax litigations under various statues for the year ended on March 31 2020 from the managements. |
| ||We have reviewed the management's underlying assumptions in estimating the tax provision and the possible outcome of the disputes. We have also reviewed by the management in evaluating its position in various matters. |
| ||We have also reviewed the assumption made by the management as at March 31 2019 and evaluated whether any change was required on account of information and updates made available during the year. |
|Appropriateness of Current and Non - Current Classifications || |
|For the purpose of current / non - current classification of the assets and liabilities the Company has ascertained its normal operating cycle as twelve months. This is based on the nature of services and the time between the acquisition of assets or inventories for processing and their presentation in cash and cash equivalents. || |
|The classification of assets and liabilities has been done on the basis of documentary evidences. Where conclusive evidences are not available the classification has been done on the basis of management's best estimates of the period in which the assets would be realized or the liabilities would be settled. We have evaluated the reasonability of the management's estimates. || |
Information Other than the Financial Statements and Auditor's Report thereon
The Company's Management and the Board of Directors is responsible for the otherinformation. The other information comprises the Board's Report Report on Corporategovernance and the Business Responsibility Report but does not include the consolidatedfinancial statements 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 material misstatementof this other information; we are required to report that fact. We have nothing to reportin this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's Management and the Board of Directors is responsible for the mattersstated in Section 134(5) of the Act with respect to the preparation of these standalonefinancial statements that give a true and fair view of the financial position financialperformance including the other comprehensive income changes inequity and cash flows ofthe Company in accordance with the accounting principle generally accepted in Indiaincluding the Indian Accounting Standards specified under Section 133 of the Act readwith the Companies (Indian Accounting Standards) Rules 2015 as amended.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentations ofthe standalone financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
In preparing the standalone financial statements management and Board of Directors isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The Board of Directors is responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibility for the Audit of 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 standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient to provide a basis for ouropinion. The risk of not detecting a material misstatement resulting from fraud is higherthan for one resulting from error as fraud may involve collusion forgery intentionalomissions misrepresentations or the override of internal controls.
Obtain an understanding of internal controls relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct 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 reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 disclosures are inadequate to modify our opinion. Our conclusions are basedon the audit evidence obtained up to the date of our auditor's report. However futureevents or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent 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 standalone financial statements may be influenced. Weconsider 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 standalone financialstatements.
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 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 (" the Order") 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 paragraph 3 and paragraph 4 of the said Order to the extentapplicable.
2. As required by Section 143(3) of the Act based on our audit 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 Standalone Balance Sheet the Standalone Statement of Profit and Loss includingthe other comprehensive income the Standalone Statement of Changes in Equity and theStandalone Statement of Cash Flows and dealt with by this Report are in agreement with thebooks of account;
d. In our opinion the Standalone Balance Sheet the Standalone Statement of Profit andLoss including Comprehensive Income and the Standalone Statement of Changes in Equity andthe Standalone Statement of Cash Flows comply with the Indian Accounting Standardsspecified under Section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended;
e. On the basis of the written representation received from the directors as on March31 2020 taken on the record by the Board of Directors none of the directors isdisqualified as on March 31 2020 from being appointed as a director in term of Section164(2) of the Act.
f. With respect to adequacy of the internal financial controls over financial reportingof the Company and the operating effectiveness of such control refer to our separatereport inAnnexure "B". Our report expresses an unmodified opinion on theadequacy and operating effectiveness of the Company's internal financial controls over thefinancial reporting.
g. With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of Section 197(16) of the Act as amended; In our opinionand to the best of our information and explanations given to us the remunerations paid bythe Company to its directors during the reporting period is in accordance with theprovision of Section 197 of the Act. The remuneration paid to any director is not inexcess of the limit laid down under section 197 of the Act.
The Ministry of Corporate Affairs has not prescribed other details under section197(16) which are required to be commented upon by us.
h. With respect to the other matters to be included in the Independent Auditor's Reportin accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in ouropinion 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 financialposition in its standalone financial statements "Refer Note No. 38".
(ii) In our opinion and according to the explanation given to us the Company has notentered into any long - term contracts including derivatives contracts for which therewere any material foreseeable losses if any.
(iii) There has been no delay in transferring amounts required to be transferred toInvestor Education and Protection Fund by the Company.
ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in Paragraph 1 under "Report on the Other Legal and RegulatoryRequirements" Section of our report of Even Date)
Report on Companies (Auditor's Report) Order 2020 ("the Order") issued bythe Central Government in term of Section 143(11) of the Companies Act 2013 ("theAct") of MMP INDUSTRIES LIMITED ("the Company")
1. In respect of the Company's fixed assets;
(a) The Company has maintained proper records in the electronic mode showing the fullparticulars including the quantitative details and situation of fixed assets.
(b) The fixed assets have been physically verified by the management in accordance witha regular programme of such verification which in our opinion provides for physicalverification of all the fixed assets at reasonable intervals.
According to the information and explanation given to us no material discrepancieswere noticed on such physical verification. In our opinion this periodicity of physicalverification is reasonable having regards to the size of the Company and the nature of itsassets.
(c) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company produced and verified by us we report that thetitle deeds of immovable properties of land and buildings which are freehold are held inthe name of the Company as at the Balance Sheet date. In respect of the immovableproperties taken lease by the Company the lease agreements are in the name of theCompany.
2. In respect of Company's Inventories:
As explained to us inventories except goods in transits and the stock lying with thirdparties were physically verified during the year by the management at reasonableintervals. Full verification could not be conducted due to COVID19 outbreaks. However thealternate audit procedures were applied procedures were applied for verifying physicalpresence of the balance inventory. In our opinion in respect of stock lying with thethird parties at the end of the year written confirmations have been obtained. In ouropinion the frequency such verification is reasonable. As explained to us there was nomaterial discrepancies noticed on such physical verification of inventories as compared tothe book records. However the discrepancies if any noticed on such physical verificationhave been properly dealt with in the books of accounts.
3. In respect of the loan secured or unsecured granted by the Company to thecompanies firms limited liabilities partnerships or other parties covered in theregister maintained under section 189 of Companies Act 2013.
According to information and explanation given to us there are no such companiesfirms limited liabilities partnership and other parties covered in the registermaintained under section 189 of the Companies Act 2013 to whom Company has granted anykind of loan whether secured or unsecured.
4. In our opinion and according to information and explanations given to us theCompany has complied with the provisions of Section 185 and Section 186 of the Act inrespect to grant of loans making investments and providing guarantees and securities asapplicable.
5. The Company has not accepted any deposits from public within the meaning of thedirectives issued by the Reserve Bank of India provision of Section 73 to Section 76 ofthe Act any other relevant provisions and rules made thereunder during the year and doesnot have any unclaimed deposits as at March 31 2020 and therefore reporting under Clause3(v) of the Order are not applicable to the Company.
6. We have broadly reviewed the cost records maintained by the Company pursuant to theCompanies (Cost Records and Audit) Rules 2014 as amended prescribed by the CentralGovernment under section 148(1) of the Companies Act 2013 in respect of the Company'sproducts / services to which said Rules are made applicable and are of the opinion thatprima facie the prescribed cost record have been made and maintained. However we havenot made a detailed examination of the cost records with a view to determine whether theyare accurate or complete.
7. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company in respect of statutory dues we report that:
(a) The Company has generally been regular in depositing undisputed statutory duesincluding goods and service tax provident fund employees' state insurance income taxsales tax service tax duties of custom duties of excise value added tax cess andother material statutory dues applicable to it with the appropriate authorities.
According to the information and explanations given to us no undisputed amountspayable in respect of goods and service tax provident fund employees' state insuranceincome tax sales tax service tax duties of custom duties of excise value added taxcess and other material statutory dues were in arrears as at March 31 2020 for a periodof more than six months from the date they became payable.
(b) According to the information and explanation given to us there are no materialdues of goods and service tax duties of custom income tax sales tax duties of exciseservice tax and value added tax which have not been deposited on account of any disputeexcept the following cases:
|Name of the Statue ||Nature of the Dues ||Forum where dispute is pending ||Period to which the amount relates ||Amount Involved (Rs. In Lakhs) |
|Income Tax Act 1961 ||Income Tax ||Commissioner of In- come Tax (Appeals) ||Financial Year 2012 2013 ||Rs.1.83 |
|Central Excise Act 1944 ||Duties of Excise ||Central Excise ||April 2004 to March 2009 ||Rs.33.22 |
8. In our opinion and according to the information and explanation given to us theCompany has not defaulted in any repayments of any loans or other borrowings from anyfinancial institutions banks and Government or has not issued any debenture during theReporting period.
9. In our opinion and according to the information and explanation given to us duringthe year the Company has not raised any money by way of initial public offer or furtherpublic offer (including debt instruments) during the year therefore the reporting underclause 3(ix) of the Order are not applicable to the Company. The Company has not raisedany amount by way of term loan during the reporting period.
10. According to the information and explanation given to us and on the basis ofexaminations of records of Company we report that no fraud by the Company or materialfraud on the Company by its officers or employees has been noticed or reported during theyear.
11. The Company has paid or provided the Managerial Remuneration during the year inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith the Schedule - V of the Companies Act 2013.
12. The Company is not a Nidhi Company as prescribed under Section 406 of the Act andhence reporting under clause 3(xii) of the Order is not applicable to Company.
13. According to information and explanations given to us and based on our examinationof the records of the Company all transactions with related parties are in compliancewith Section 177 and Section 188 of the Act wherever applicable and details of suchtransactions have been disclosed in the standalone financial statements under "NoteNo. 44" - the Transactions with the Related Party" as required under IndianAccounting Standard (Ind AS) 24 "Related Party Disclosure" specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rule 2014.
14. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause 3(xiv) of the said Order is not applicable to Company.
15. In our opinion and according to the information and explanation given to us duringthe year the Company has not entered into any non - cash transactions with its directorsor the person connected with him and hence provisions of Section 192 of Act are notapplicable. Thus reporting under clause 3 (xv) of the Order is not applicable to theCompany.
16. The Company is not required to be registered under Section 45 - IA of the ReserveBank of India Act 1934 therefore the reporting under clause 3(xvi) of the Order is notapplicable to the Company.
ANNEXURE "B" TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in Paragraph 2(f) under "Report on the Other RegulatoryRequirements" Section of our report of even date)
Report on the Internal Financial Controls over the Financial Reporting 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 the Financial Reporting of "MMPINDUSTRIES LIMITED" ("the Company") as of March 31 2020 inconjunction with our audit of the standalone financial statements of the Company for theyear 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.
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 financial controls both applicable to an audit of internal 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 were established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includesobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors' judgment including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
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 standalone financial statements for external purposes in accordance withgenerally accepted accounting principles. A Company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the Company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of standalonefinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the Company are being made only in accordance withauthorizations of management and directors of the Company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the Company's assets that could have a material effect financialstatements.
Inherent Limitations of Internal Financial Controls over the Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.
Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanation givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2020 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of internal financialcontrols over financial reporting issued by the Institute of Chartered Accountants ofIndia.