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Morepen Laboratories Ltd.

BSE: 500288 Sector: Health care
NSE: MOREPENLAB ISIN Code: INE083A01026
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OPEN 23.30
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VOLUME 323053
52-Week high 34.95
52-Week low 7.21
P/E 32.43
Mkt Cap.(Rs cr) 1,050
Buy Price 23.30
Buy Qty 8960.00
Sell Price 23.40
Sell Qty 1000.00
OPEN 23.30
CLOSE 23.75
VOLUME 323053
52-Week high 34.95
52-Week low 7.21
P/E 32.43
Mkt Cap.(Rs cr) 1,050
Buy Price 23.30
Buy Qty 8960.00
Sell Price 23.40
Sell Qty 1000.00

Morepen Laboratories Ltd. (MOREPENLAB) - Auditors Report

Company auditors report

To the Members of Morepen Laboratories Limited

Report on the Audit of Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of Morepen Laboratories Limited (the Company) which comprise the Balance Sheet as at 31st March 2019 the Statement of Profit and Loss (including Other Comprehensive Income) Statement of Changes in Equity and Statement of Cash Flows for the year then ended and summary of 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 (Ind AS) and other accounting principles generally accepted in India of the state of affairs of the Company as at 31st March 2019 the profit and total comprehensive income changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of 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 together with the independence requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that in our professional judgement were of most significance in our audit of 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. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit MatterAuditor's Response
In the Scheme of Arrangement & Compromise under Section 391 of the Companies Act 1956 as approved by the Hon'ble High Court of Himachal Pradesh vide its Order dated 4th August 2009 the Company allotted 92490413 Equity Shares to the fixed deposit holders in settlement of their dues. The Hon'ble NCLT vide its judgment dated 12th March 2018 dismissed the Company's petition seeking approval of the Scheme and stated that the order will not affect the allotment of the shares to the FD holders who have traded the shares to the third parties or transferred the allotted shares and to the balance FD holders the company shall pay the outstanding amount as per the scheme approved by the Company Law Board (CLB). On an appeal preferred by the company against the said order of NCLT the Hon'ble National Company Law Appellate Tribunal (NCLAT) stayed the direction of NCLT and reserved the order for judgment after hearing the matter. Refer Note. No. 20 and 38(d) to the standalone financial statements.Principal Audit Procedures We collected the following documents:
- Scheme approved by the Company Law Board (CLB) dated 19th August 2003.
- Scheme of Arrangement & Compromise under Section 391 of the Companies Act 1956 approved by the Hon'ble High Court of Himachal Pradesh dated 4th August 2009.
- Judgment of Hon'ble NCLT dated 12th March 2018 dismissing the Company's petition seeking approval of the Scheme of arrangement with the Fixed Deposit holder.
- Copy of order of Hon'ble National Company Law Appellate Tribunal dated 27th April 2018 staying the direction issued by Hon'ble NCLT in its order dated 12th March 2018.
- Copy of order of Hon'ble National Company Law Appellate Tribunal (NCLAT) dated 8th April 2019 reserving the order for judgement.
We read and analysed the above orders/judgments. The outcome of the judgement may impact financials of the company.

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

The Company's Board of Directors is responsible for preparation of the other information. The other information comprises the information included in Annual Report but does not include the standalone financial statements and our auditor's report thereon.

Our opinion on financial statement 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 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 applicable 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 judgements 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 statement that give a true and fair view and are free from material misstatement whether due to fraud or error.

In preparing the financial statements the Board of Directors is responsible for assessing the company's ability to continue as going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the company or to cease the 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 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 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 judgement and maintain professional skepticism throughout the audit. We also:

 Identify and assess the risks of material misstatement of the financial statements whether due to fraud or error design and perform audit procedure 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 statement 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 transaction 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 factor 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 disclosures 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 in terms of section 143(11) of the Act we give in Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.

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 best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion proper books of accounts 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 Flows dealt with by this report are in agreement with the books of accounts.

d) In our opinion the aforesaid standalone financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act read with relevant rules issued thereunder.

e) On the basis of the written representations received from the directors as on 31st March 2019 taken on record by the Board of Directors none of the directors is disqualified as on 31st 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. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting.

g) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act as amended:

In our opinion and to the best of our information and according to the explanations given to us the remuneration paid by the company to its directors during the year is in accordance with the provisions of section 197 of the Act.

h) 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 standalone financial statements.

(ii) The Company did not have any long term contracts including derivate contracts.

(iii) During the year the company was not liable to transfer any amount to the Investor Education and Protection Fund.

ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1 under the heading Report on Other Legal and Regulatory Requirements of our report of even date on the standalone financial statements of Morepen Laboratories Limited for the year ended 31st March 2019.)

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets

(b) According to the information and explanation given to us the Company has a regular programe of physical verification of its fixed assets. In our opinion the frequency of physical verification is reasonable having regard to the size and the nature of its assets. As informed to us the discrepancies noticed on such verification are not material and have been properly dealt with in the books of accounts.

(c) According to the information and explanations given to us and on the basis of our examination of the books of accounts the title deeds of immovable property are held in the name of the Company.

(ii) As explained to us the inventories were physically verified during the year by the Management at reasonable intervals and no material discrepancies were noticed on physical verification.

(iii) According to the information and explanations given to us the company has not granted any loans secured or unsecured to companies firms limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act 2013(the Act). Hence provision of this clause is not applicable.

(iv) According to the information and explanations given to us and based on audit procedures performed we are of the opinion that in respect of loans investments guarantees and security the company has complied with the provisions of section 185 and 186 of the Act.

(v) During the financial year ended 31st March 2010 pursuant to a Scheme of Arrangement & Compromise under Section 391 of the Companies Act 1956 approved by the Hon'ble High Court of Himachal Pradesh vide its Order dated 4th August 2009 the Company allotted 92490413 Equity Shares to the fixed deposit holders in settlement of their dues. On an appeal filed against the said Order by the Central Government the Hon'ble Division Bench of the Hon'ble High Court of Himachal Pradesh remanded the matter back to single judge for considering the representation of central government and deciding the matter afresh. The matter was later transferred to Hon'ble National Company Law Tribunal (NCLT) Chandigarh. The Hon'ble NCLT vide its judgment dated 12th March 2018 dismissed the Company's petition seeking approval of the Scheme of arrangement with the Fixed Deposit holders. However Hon'ble NCLT further stated that the order will not affect the allotment of the shares to the FD holders who have traded the shares to the third parties or transferred the allotted shares. It directed the company that it shall pay the outstanding amount as per the scheme approved by the Company Law Board (CLB) to the original FD holders (except to those who have since traded/transferred the shares allotted to them). The Company had filed an appeal before the Hon'ble National Company Law Appellate Tribunal (NCLAT) at New Delhi against the order dated 12th March 2018 of the Hon'ble NCLT Chandigarh. The Hon'ble NCLAT while issuing notice to the respondents has stayed the operation of the impugned order dated 12th March 2018. The Hon'ble National Company Law Appellate Tribunal (NCLAT) after hearing the matter has reserved the order for judgment. Pending disposal of the company's appeal before Hon'ble NCLAT the liability towards deposit holders if any is not ascertained. (Refer Note. No. 38(d) to the standalone financial statements).

(vi) We have broadly reviewed the books of accounts maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148(1) of the Act in respect of the company's products to which the said rules are made applicable and that prima facie the prescribed cost records have been made and maintained. However we have not carried out detailed examination of the records with a view to determine whether these are accurate and complete.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the company during the year the company is regular in depositing amount deducted /accrued in respect of undisputed statutory dues including duty of custom duty of excise cess with the appropriate authorities. However the company is not regular in depositing the dues of Employee's State Insurance Provident fund Income Tax (TDS) Goods and Services Tax (GST).

According to the records and information and explanations given to us the following statutory dues were in arrears as on 31st March 2019 for a period of more than six months from the date they became payable-

NatureYearOutstanding sinceAmount (Rs)
Fringe benefit taxA.Y. 2009-1031.03.20111387035

(b) According to the information provided to us the following duties of excise have not been deposited by the company on account of disputes:

Name of the statuteNature of duesAmount (in )'Period to which the amount relatesForum where dispute is pending
Central Excise Act 1944Excise duty Penalty Interest7366645June 2004 to July 2008CESTAT-Chandigarh
Central Excise Act 1944Excise duty Penalty Interest7612753June 2004 to March 2009CESTAT-Chandigarh
Central Excise Act 1944Excise duty Penalty Interest87736December 2008 to March 2009CESTAT-Chandigarh
Central Excise Act 1944Excise duty Penalty Interest1397264April 2009 to March 2010CESTAT-Chandigarh
Central Excise Act 1944Excise duty Penalty Interest168325April 2009 to March 2010CESTAT-Chandigarh
Central Excise Act 1944Excise duty Penalty Interest210949April 2010 to September 2010CESTAT-Chandigarh
Central Excise Act 1944Excise duty Interest764251April 2010 to December 2010CESTAT-Chandigarh
Central Excise Act 1944Excise duty Interest2817881January 2011 to June 2015CESTAT-Chandigarh
Central Excise Act 1944Excise duty Interest1406727July 2015 to June 2017Commissioner of Appeal - Chandigarh

(viii) According to the information and explanations given to us by the management the company has not defaulted in repayment of loans or interest to Banks/FIs.

(ix) According to the information and explanations given to us and based on our examination of the records of the company the company did not raise any money by way of initial public offer or further public offer (including debt instruments) and/or term loan during the year.

(x) During the course of our examination of the books and records of the company carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us we have neither come across any instance of fraud by the company or on the company by its officers or employees noticed or reported during the year nor have we been informed of any such case by the Management.

(xi) According to the information and explanations given to us and on the basis of our verification of books of accounts of the company the company has paid/provided for Managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 of the Act read with Schedule V of the Act.

(xii) In our opinion and according to 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 & 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 convertible debentures during the year under review. Accordingly the provision of clause 3(xiv) of the Order are not applicable to the company.

(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 any non- cash transaction with directors or person connected with them during the year. Accordingly the provision of clause 3(xv) of the Order are not applicable to the company.

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

ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT (Referred to in paragraph 2(f) under the heading Report on Other Legal and Regulatory Requirements of our report of even date on the standalone financial statements of Morepen Laboratories for the year ended 31st March 2019)

Report on the Internal Financial Controls over 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 financial reporting of Morepen Laboratories Limited (the Company) as of 31st 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 (the Guidance Note). 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 Act.

Auditors' Responsibility

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 and the Standards on Auditing prescribed under section 143(10) of the Act to the extent applicable to an audit of internal financial control. 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 authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company's assets that could have a material effect on the financial statements.

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.

Opinion

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 March 31 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.

For Satinder Goyal & Co.
Chartered Accountants
Firm's Regn. No: 027334N
S.K. Goyal
Date : 4th May 2019(Partner)
Place : New DelhiMembership No. : 084613