To the Members of Morarjee Textiles Limited
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of MorarjeeTextiles Limited ("the Company") which comprise the Balance Sheet as at March31 2019 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Statement of Cash Flows for the year then ended andnotes to the standalone Ind AS financial statements including a summary of Significantaccounting policies and other explanatory information (hereinafter referred to as"Ind AS Financial Statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India including the Indian Accounting Standards ("Ind AS") of the state ofaffairs of the Company as at March 31 2019 its loss including other comprehensiveincome changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with Standards on Auditing (SAs) specified undersection 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the standalone Ind ASfinancial statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia ("ICAI") together with the ethical requirements that are relevant to ouraudit of the standalone Ind AS financial statements under the provisions of the Act andRules thereunder and we have ful_lled our other ethical responsibilities in accordancewith these requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our qualified opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Wehave determined the matter described below to be the key audit matter to be communicatedin our report.
|Key audit matter ||How the matter was addressed in the audit |
|Valuation of Inventory Total inventory valuation as on March 31 2019 is Rs 10489.40 lakhs (March 31 2018 : Rs 10399.37 lakhs) ||Our audit procedures in respect of this area included but not limited: We understood and tested the design and operating effectiveness of controls as established by the management for valuation of inventory and identifying slow moving inventory and determina- tion of net realizable value of inventory as on date. We observed the physical inventory verification procedures carried out by the management as at the year end. We performed year end cut-off pro- cedures to validate the actual stocks carried in the inventory as at year end. |
|Inventory of Company comprises of finished goods and Work in Prog- ress (WIP). As described in Note 8 to the accom- panying standalone Ind AS financial statements Cost of Inventory repre- sents the costs of materi- als conversion cost and related production costs at each stage till date. || |
|It is held at the lower of cost and net realis- able value (NRV). Some of the finished goods and WIP (Grey Cloth) are slow moving. ||We tested the adequacy of the key assumptions and estimates used to determine cost allocation at each stage of production and consistency in such allocation including mathematical ac- curacy of the calculations |
|Considering the mate- riality of the amount in- volved and degree of management judgment in valuation we have identified valuation of inventory as a key audit matter for the current year audit. ||We performed inventory movement and ageing analysis as a re-performance procedure for assessing management's ascertainment of slow moving inven- tory. |
| ||We performed NRV testing by com- paring subsequent sale/order value. We also evaluated judgment used by the management for arriving at the diminution in value of slow moving inventory. |
| ||The above audit procedures enabled us to conclude on the valuation of inventory held by the company as on the date of Balance Sheet. |
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion &Analysis Corporate Governance and Directors' Report but does not include the standaloneInd AS financial statements and our auditor's report thereon. Our opinion on thestandalone IndAS financial statements does not cover the other information and we do notexpress any form of assurance conclusion thereon. In connection with our audit of thefinancial statements our responsibility is to read the other information and in doingso consider whether the other information is materially inconsistent with the standaloneIndAS financial statements or our knowledge obtained in the audit or otherwise appears tobe materially misstated. If based on the work we have performed we conclude that thereis a material misstatement of this other information we are required to report that fact.We have nothing to report in this regard. Responsibilities of Management and Those Chargedwith Governance for the Standalone Ind AS Financial Statements The Company's Board ofDirectors is responsible for the matters stated in section 134(5) of the Act with respectto the preparation of these standalone Ind AS financial statements that give a true andfair view of the financial position financial performance including other comprehensiveincome changes in equity and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including Ind AS specified under section 133 ofthe Act read with relevant rules issued thereunder. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standaloneInd AS financial statements that give a trueand fair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so. Those Board of Directors are also responsible foroverseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial StatementsOur objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of this standalone Ind AS financial statements. As part of an audit inaccordance with SAs we exercise professional judgment and maintain professionalskepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the companyhas adequate internal financial controls with reference to financial statements in placeand the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast Significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone Ind AS financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone IndAS financial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and Significant audit findings including anySignificant defficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most Significance in the audit of the standalone Ind AS financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
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 sub-section (11) of Section 143 ofthe Act we give in "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of 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;
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 the Statement of Cash Flows andthe Statement of Changes in Equity dealt with by this Report are in agreement with thebooks of account;
d. In our opinion the aforesaid Standalone Ind AS Financial Statements comply with theIndian Accounting Standards specified under Section 133 of the Act read with relevantrules issued thereunder;
e. On the basis of written representations received from the directors as on March 312019 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct;
f. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls we give ourseparate Report in "Annexure 2".
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/ provided by the Company to its directors during the year is inaccordance with the 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 Ind AS Financial Statements - Refer Note no. 37 on ContingentLiabilities to the StandaloneInd AS Financial Statements;
(ii) The Company did not have any material foreseeable losses on long-term contractsincluding derivative contracts;
(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
For Haribhakti & Co. LLP
ICAI Firm Registration No. 103523W / W100048
Membership No. 034828
Mumbai: May 8 2019
ANNEXURE 1 TO THE INDEPENDENT AUDITOR'S REPORT
[Referred to in Paragraph1under Report on Other Legal and RegulatoryRequirements' in the Independent Auditor's Report of even date to the members ofMorarjeeTextiles Limited("the Company")on the Standalone Ind AS FinancialStatements for the year ended March 31 2019] (i) (a) The Company has maintained properrecords showing full particulars including quantitative details and situation of fixedassets.
(b) During the year the fixed assets of the Company have been physically verified bythe Management and as informed no material discrepancies were noticed on suchverification. In our opinion the frequency of verification is reasonable having regard tothe size of the Company and the nature of its assets.
(c) The title deeds of immovable properties recorded as fixed assets in the books ofaccount of the Company are held in the name of the Company.
(ii) The inventory(excluding stocks lying with third parties) has been physicallyverified by the Management during the year. In our opinion the frequency of verificationis reasonable. In respect of inventory lying with third parties at the year end it hassubstantially been confirmed by them.As informed no material discrepancies were noticedon physical verification carried out during the year.
(iii) As informed the Company has not granted any loans secured or unsecured tocompanies firmsLimited Liability Partnerships or other parties covered in the registermaintained under Section 189 of the Act. Accordingly Paragraphs 3 (iii)(a) 3 (iii)(b)and 3 (iii)(c) of the Order are not applicable to the Company.
(iv) Based on information and explanation given to us in respect of loans investmentsguarantees and securities the Company has complied with the provisions of Section 185 and186 of the Act.
(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public within the provisions of Sections 73to 76 of the Act and the rules framed there under.
(vi) We have broadly reviewed the books of account maintained by the Company in respectof products wherethe maintenance of cost records has been specifiedby the CentralGovernment under sub-section (1) of Section 148 of the Act and the rules framed thereunder and we are of the opinion that prima facie the prescribed accounts and recordshave beenmade and maintained.
(vii) (a) The Company is generally regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund employees' state insurance incometax sales tax service tax value added tax goods and services tax customs duty exciseduty cess and any other material statutory dues applicable to it however delays indeposit have not been serious.
According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income tax sales taxservice tax value added tax goods and services tax customs duty excise duty cess andany other material statutory dues applicable to it were outstanding at the year end fora period of more than six months from the date they became payable.
(b) According to the information and explanation given to us there are no dues withrespect to income tax sales tax service tax value added tax goods and services taxcustoms duty excise duty which have not been deposited on account of any dispute exceptas follows:
|Name of the Statute ||Nature of Dues * ||Financial Year ||Amount ||Forum where Dispute is Pending |
| || || ||(Rs in lakhs) || |
|Central Excise Act 1944 ||Excise duty ||1979-80 to 1985-86 ||6.22 ||Commissioner |
| || ||1990-91 ||0.09 || |
| || ||1993-94 to 1995-96 ||146.49 || |
| || ||1999-2000 to 2001-02 ||218.61 || |
|Central Excise Act 1944 ||Excise duty ||1990-91 to 1991-92 ||2.10 ||CESTAT |
| || ||1995-96 to 2002-03 ||488.27 || |
|Central Excise Act 1944 ||Excise duty ||1997-98 to 2001-02 ||3.19 ||High Court |
| || ||2008-09 ||22.34 || |
|Central Excise Act 1944 ||Excise duty ||1981-84 ||296.14 ||Supreme Court |
|Maharashtra Value Value added tax Act 2002 ||Sales tax ||2006-07 to 2007-08 ||66.20 ||Joint Commissioner of Sales Tax (Appeals) |
* Includes amounts of interest and penalty where ascertainable.
(viii)According to the information and explanations given to us the Company has notdefaulted in repayment of loans or borrowings to financial institutions and banks as atthe Balance Sheet date.As informed the Company has not availed any loan or borrowing fromany government nor has it issued any debentures.
(ix) In our opinion and according to the information and explanations given to us theCompany has utilised the money raised by way of term loans during the year for thepurposes for which they were raised.
As informed the Company has not raised money by way of initial public issue offer /further public offer (including debt instruments).
(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of fraud by the Company or any fraud on the Company by its Officers or employeesnoticed or reported during the year nor have we been informed of any such instance by theManagement.
(xi) According to the information and explanations given to us managerial remunerationhas been paid / provided in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi
Company. Accordingly Paragraph 3(xii) of the Order is not applicable to the Company.
(xiii) According to the information and explanation given to us all transactionsentered into by the Company with the related parties are in compliance with Sections 177and 188 of Act where applicable and the details have been disclosed in the Standalone IndAS Financial Statements as required by the applicable Indian Accounting Standards. (ReferNote no. 47 to the Standalone Ind AS Financial Statements).
(xiv)The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review.AccordinglyParagraph 3(xiv) of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with him duringthe year. (xvi)According to the information and explanation given to us the Company isnot required to be registered under Section 45-IA of the Reserve Bank of India Act 1934.
For Haribhakti & Co. LLP
ICAI Firm Registration No. 103523W / W100048
Membership No. 034828
Mumbai: May 8 2019
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT
[Referred to in Paragraph 2 under Report on Other Legal and RegulatoryRequirements' in the Independent Auditor's Report of even date to the members ofMorarjeeTextiles Limitedon the StandaloneInd AS Financial Statements for the year ended March 312019]
Report on the Internal Financial Controls over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of MorarjeeTextiles Limited("the Company") as of March 31 2019 in conjunction with ouraudit of the Standalone Ind AS Financial Statements of the Company for the year ended onthat 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 Reporting("the Guidance Note") issued by the Institute of Chartered Accountants ofIndia("ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.
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 and the Standards on Auditing specified under section 143(10) ofthe Act to the extent applicable to an audit of internal financial controls both issuedby the ICAI. 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 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 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 judgement including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls with reference to Financial Statements
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 with reference to FinancialStatements
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 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 March 312019 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 ICAI.
For Haribhakti & Co. LLP
ICAI Firm Registration No. 103523W / W100048
Membership No. 034828
Mumbai: May 8 2019