To the Members of Modison Metals Limited
Report on the Audit of the Standalone Financial Statements Opinion
We have audited the Standalone Financial Statements of Modison Metals Limited("the Company") which comprise the Balance Sheet as at March 31 2021 and theStatement of Profit and Loss (including Other Comprehensive Income) Statement of Changesin Equity and Statement of Cash flows for the year then ended and notes to the StandaloneFinancial Statements including a summary of the significant accounting policies and otherexplanatory information (hereinafter referred to as "the Standalone FinancialStatements"). In our opinion and to the best of our information and according to theexplanations given to us the aforesaid Standalone Financial Statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2021and its net profit including other comprehensive income changes in equity and its cashflows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder Section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial StatementsSection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India together with ethicalrequirements that are relevant to our audit of the Standalone Financial Statements underthe provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.
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.
|Sr No. Key Audit Matter ||Response to Key Audit Matter |
|1 Inventory Valuation ||Principle Audit Procedures |
|As at March 31 2021 the Company held Rs. 5995.12 Lakhs of inventory representing 29.59% of total assets (out of which inventory amounting to Rs. 83.34 Lakhs is in transit). Given the size of the inventory balance relative to the total assets of the Company and the estimates and judgments described below the valuation of inventory required significant audit attention. ||We have performed the following procedures over the valuation of inventory:- |
|As disclosed in Note No. 2(F) inventories are held at the lower of cost or net realisable value determined by using the weighted average cost method except for inventories that are booked by customers for their process work which are valued at the rates at which the same is booked by them. ||?For sample inventory items re-performed the weighted average cost calculation; |
|Management undertake the following procedure for determining valuation of closing inventory: ||?We tested that the ageing report used by management by verifying a sample of aged inventory with the last recorded invoice; |
|? Use Inventory ageing report to check slow moving & non-moving inventory to evaluate write down if any required; ||?On a sample basis we tested the net realizable value of inventory of raw material lines with recent selling prices of finished goods wherein these raw materials are used; |
|? Perform a line-by-line analysis of remaining inventory to ensure it is stated at the lower of cost or net realizable value and a specific write down is recognized if required. ||?Held discussions with management to understand and corroborate the assumptions applied in estimating the inventory norms used for valuation of the inventory held as work in progress. |
|? For valuing inventory work in progress the Company follows norm based on management's estimates and judgments. ||We also made enquiries with the management and considered the results of our testing above to determine whether any specific write downs were further required. |
| ||From the procedures performed we have no matters to report. |
|2 Derivative Hedging of Commodity Price Risk ||Principle Audit Procedures |
|The Company uses derivative financial instruments to hedge commodity price risks. These instruments are typically used to hedge prices of silver which is the main raw material used by the Company for production of its finished products. Due to estimates and judgments involved in entering to derivative contract it requires significant audit attention. ||We have performed the following procedures to verify the accounting of derivative financial instruments. |
|Management undertakes the following procedure for accounting of derivative contract: ||?Obtaining an understanding of the risk management policies and testing key controls for the use and the measurement of derivative financial instruments |
|? Perform reconciliation of derivative financials instrument with third party confirmation ||?Reconciling derivative financial instruments data to third party confirmations. |
|? Checking of minimum margin money required to keep with third party. ||?Reconciling hedging gain / loss with third party confirmations Considering the appropriateness of disclosures in relation to derivative financial instruments. |
|? Booking of hedging gain / loss on daily basis (For the year ended March 31 2021 the Company has net hedging loss of Rs.358.68 Lakhs and had net hedging loss of Rs.281.93 Lakhs for the year ended March 31 2020 Shown under exceptional item.) || |
The Company's Management and the Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the Standalone Financial Statements and our auditors'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 in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation; we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management and Those charged with Governance for the StandaloneFinancial 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 thefinancial performance the changes in equity and the cash flows of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under Section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of 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 the Management and the Board ofDirectors are responsible for assessing the Company's ability to continue as a goingconcern disclosing as applicable matters related to going concern and using the goingconcern basis of accounting unless management either intends to liquidate the Company orto cease operations or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the 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 and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theCompanies Act 2013 we are also responsible for expressing our opinion on whether thecompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
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 exists we are required to draw attention inour auditor's report to the related disclosures in the financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions 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 financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant 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 (Auditors' Report) Order 2016 ("the Order")issued by the Central Government of India in terms of Section 143 (11) of the Act we givein the "Annexure A" a statement on the matters specified in paragraphs 3 and 4of the Order to the extent applicable.
2. As required by Section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit of the aforesaidStandalone Financial Statements.
b) In our opinion proper books of account as required by law relating to preparationof the aforesaid Standalone Financial Statements have been kept by the Company so far asit appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) the Statement of Changes in Equity and the Cash Flow Statement dealt with by thisReport are in agreement with the books of account maintained for the purpose ofpreparation of the Standalone Financial Statements.
d) In our opinion the aforesaid Standalone Financial Statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Account) Rules 2014.
e) On the basis of the written representations received from the directors as on March31 2021 and taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2021 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".
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 according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of section 197 of the Act.
h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 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 Standalone Financial Statements (Refer Note. 29(a) to the Ind AsStandalone Financial Statements).
ii. The Company did not have any material foreseeable losses on long-term contractsincluding derivatives contracts.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the company.
ANNEXURE A TO THE AUDITOR'S REPORT
Referred to in paragraph 2 of Report on other Legal and RegulatoryRequirements' in our Report of even date on the accounts of Modison Metals Limitedfor the year ended March 31 2021 i. (a) The Company is maintaining proper records showingfull particulars including quantitative details and situation of fixed assets.
(b) The fixed assets of the company are physically verified by the Management accordingto a phased programme designed to cover all the items over a period of three years whichin our opinion is reasonable having regard to the size of the company and the nature ofits assets. Pursuant to the programme a portion of the fixed assets has been physicallyverified by the management during the year and discrepancies noticed between the bookrecords and the physical inventories were not material and have been properly dealt within the accounts.
(c) According to information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.
ii. During the year the inventories have been physically verified by the management.In our opinion the frequency of verification is reasonable. The discrepancies noticed onphysical verification of inventories as compared to the book records have been properlydealt with in the books of accounts.
iii. As informed to us the Company has not granted loans secured or unsecured tocompanies firms limited liability partnerships or other parties covered in the registermaintained under Section 189 of the Act. Hence sub clauses (a) to (c) of clause 3(iii) arenot applicable to the Company.
iv. The company has complied with provisions of Section 186 of the Companies Act 2013in respect of investments made and Section 185 of the Companies Act 2013 is notapplicable as there were no such loans securities or guarantees provided during the year.
v. The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the rules framed there under to the extentnotified and therefore clause 3(v)is not applicable.
vi. The Central Government has prescribed maintenance of cost records for the companyunder sub Section (1) of Section 148 of the Companies Act 2013 and such accounts andrecords have been made and maintained by the Company. However no detailed examinations ofsuch records have been carried out by us.
vii. (a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including Provident Fund Employees' State Insurance Income Tax CustomsDuty Cess Goods & Service Tax and any other material statutory dues applicable toit.
(b) According to the records of the Company there are no dues of Income Tax Sales Taxand Excise Duty which have not been deposited on account of any dispute except disclosedbelow:
The disputed amounts that have not been deposited in respect of Income Tax Sales Taxand Excise Duty are as under:
|Sr. No. ||Name of the Statute ||Nature of the dues ||Forum where the dues is pending ||Rs. In Lakhs |
|1. ||Central Excise Act1944 ||Demand of Excise Duty on Sales ||Customs Excise & Service Tax Appellate Tribunal ||967.08 |
|2. ||Income tax Act 1961 ||Income tax (AY 17-18) ||Commissioner of Income Tax (Appeals) ||8.74 |
| || ||Income tax (AY 16-17) ||Commissioner of Income Tax (Appeals) ||12.74 |
| || ||Income tax (AY 14-15) ||Tribunal ||1.74 |
| || ||Income tax (AY 14-15) ||Commissioner of Income Tax (Appeals) ||36.79 |
| || ||Income tax (AY 10-11) ||High Court ||25.11 |
viii. According to the records of the Company examined by us and information andexplanation given to us the Company has not defaulted in repayment of dues to banksduring the year. The company has not taken any loan or borrowing from governmentfinancial institution and has not issued debentures during the year.
ix. The Company has not raised any money by way of public issue/ further offer(including debt instruments) and through term loans during the year. Accordingly clause3(ix) of the order is not applicable to the Company.
x. Based upon the audit procedures performed and information and explanation given bythe management we report that no fraud by the Company and no fraud on the Company by itsofficers or employees has been noticed or reported during the year.
xi. In our opinion and according to the information and explanations given to us themanagerial remuneration has been paid or provided in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with schedule V to the CompaniesAct 2013.
xii. In our opinion and according to the information and explanations given to us thenature of the activities of the company does not attract any special statue applicable toNidhi Company.
Accordingly clause 3(xii) of the order is not applicable to the company.
xiii. According to the information and explanation given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with Sec 177 and 188 of Companies Act 2013 where applicable and details ofsuch transactions have been disclosed in the Standalone Financial Statements as requiredby the applicable accounting standards.
xiv. In our opinion and according to the information and explanations given to us andbased on our examination of the records of the Company the company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year. Accordingly clause 3 (xiv) of the Order is not applicable tothe Company.
xv. In our opinion and according to the information and explanations given to us andbased on our examination of the records of the Company the company has not entered intoany non-cash transactions with directors or persons connected with him. Accordinglyclause 3 (xv) of the Order is not applicable to the Company.
xvi. The company is not required to be registered under Sec 45-IA of the Reserve Bankof India Act 1934. Accordingly clause 3 (xvi) of the Order is not applicable to theCompany.
ANNEXURE B TO THE AUDITORS' REPORT
(Referred to in paragraph 2(f) of Report on Other Legal and RegulatoryRequirements' section of our report of even date)
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 ModisonMetals Limited ("the Company") as of March 31 2021 in conjunction with ouraudit of the Standalone Financial Statements of the Company for the year ended on thatdate.
Management's Responsibility for Internal Financial Controls
The Company's Board of Directors are responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued 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 an audit of internal financial controls both issued by the ICAI. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects. Our audit involves performingprocedures to obtain audit evidence about the adequacy of the internal financial controlssystem over financial reporting and their operating effectiveness. Our audit of internalfinancial controls over financial reporting included obtaining an understanding ofinternal financial controls over financial reporting assessing the risk that a materialweakness exists and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of theStandalone Financial Statements whether due to fraud or error. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion 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 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 on the StandaloneFinancial Statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanations 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 31st March 2021 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 ICAI.
For Kanu Doshi Associates LLP
FRN. No. 104746W/W100096
Membership no. 148916
Date: 31st May 2021