To the Members of
N R AGARWAL INDUSTRIES LIMITED
Report on the Audit of the Ind AS Financial Statements Opinion
We have audited the accompanying Ind AS financial statements of N R AGARWAL INDUSTRIESLIMITED (the Company) which comprise the Balance Sheet as at March 31 2019the Statement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date andnotes to financial statements including a summary of significant accounting policies(hereinafter referred to as the the Ind AS financial statements)
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Ind AS financial statements give the information required bythe Companies Act 2013 (the Act) in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended (Ind AS) and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2019 and the profit and totalcomprehensive income changes in equity and its cash flows for the year ended on thatdate.
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 the ethicalrequirements that are relevant to our audit of the Ind AS financial statements under theprovisions of the Act and the Rules made thereunder and we . have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion on the Ind AS financial statements financialstatements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our Ind AS financial statements of the current period. These matters wereaddressed in the context of our audit of the
Ind AS financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters.
|Key Audit Matter ||How was the matter addressed in our audit |
|1 Revenue recognition [refer note no. 26 to the Ind AS financial statements] ||Audit procedures with regard to revenue recognition included testing controls automated and manual around dispatches/ deliveries inventory reconciliations and circularization of receivable balances substantive testing for cut-offs and analytical review procedures. |
|Revenue is one of the key profitdrivers and is therefore susceptible to misstatement. 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 year. || |
|2 Capital work-in-progress/Property Plant and Equipment (PPE) [refer note no. 2 to the Ind AS financial statements] ||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. |
|The Company has made additions to the Capital work-in-progress/Property Plant and Equipment of the ongoing units. Also the company has capitalized a portion of its capital work-in-progress considering them as ready to use. The assets need to be capitalized and depreciated once the assets are ready for use as intended by the management. ||We tested the source documentation to determine whether the expenditure is of capital nature and has been appropriately approved and segregated into appropriate |
|2 Inappropriate timing of capitalization of the asset and/or inappropriate classification of categories of items of PPE could result in material misstatement of Capital work-in-progress/ PPE with a consequent impact on depreciation charge and results for the year. ||categories. Further through sites visits we have physically verified the existence of capital work in progress/PPE as at the reporting period. |
|3 Provisions and Contingent Liabilities (including direct and indirect taxes) [ refer note no. 33 to the Ind AS financial statements] ||Obtained an understanding from the management with respect to process and controls followed by the Company for identification and monitoring of developments in relation to the litigations including completeness thereof. |
|The Company is involved in direct and indirect tax litigations that are pending with various tax authorities. Whether a liability is recognised or disclosed as a contingent liability in the financial statements is inherently judgemental and dependent on a number of significant and assessments. These include assumptions relating to the likelihood and/or timing of the cash outflows from the business and the interpretation of local laws and pending assessments at various levels of the statute. ||Obtained the list of litigations from the management and reviewed their assessment of the likelihood of outflow of economic resources being probable possible or remote in respect of the litigations. This involved assessing the probability of an unfavorable outcome of a given proceeding and the reliability of estimates of related amounts. |
| ||Performed substantive procedures including tracing from underlying documents / communications from the tax authorities and re-computation of the amounts involved. |
| ||Assessed management's conclusions and understanding precedents in similar cases. |
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the Management Discussion and AnalysisBoard's Report including Annexures to Board's Report and Corporate Governance but doesnot include the Ind AS financial statements and our auditor's report thereon. The abovestated reports are expected to be made available to us after the date of this auditor'sreport.
Our opinion on the Ind AS financial statements does not cover the other information andwe will not express any form of assurance conclusion thereon.
In connection with our audit of the Ind AS financial statements our responsibility isto read the other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the Ind ASfinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
When we read the above stated reports if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance.
Management's Responsibility for the Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these Ind AS financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgements 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 Ind AS financial statementsthat give a true and fair view and are free from material misstatement whether due tofraud or error. In preparing the Ind AS financial statements management is responsiblefor assessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting 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 also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the Ind AS financialstatements as a whole are free from material misstatement whether due to fraud or errorand 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 auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these Ind AS 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 Ind AS 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 deficiencies in internalcontrol that misstatement resulting from fraud is higher than for one resulting fromerror as fraud may involve collusion forgery intentional omissions misrepresentationsor 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 the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company 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 ability to continue as agoing concern. If we conclude that a material uncertainty exists we are required to drawattention in our auditor's report to the related disclosures in the Ind AS financialstatements or if such disclosures are inadequate to modify our opinion. Our conclusionsare based on the audit evidence obtained up to the date of our auditor's report. Howeverfuture events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the Ind AS financialstatements including the disclosures and whether the Ind AS financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the Ind AS financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the Ind AS financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the Ind AS financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including weanysignificant 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 Ind AS financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror 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
As required by the Companies (Auditor's Report) Order 2016 (the Order)issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies
Act 2013 we give in the Annexure A a statement on the matters specifiedin paragraphs 3 and 4 of the Order to the extent applicable.
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 aforesaidInd AS financial statements.
b) In our opinion proper books of account as required by law relating to preparationof the aforesaid Ind AS financial statements have been kept by the Company so far as itappears from our examination of those books.
c) The company does not have any branches. Hence the provisions of section 143(3)(c)is not applicable.
d) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Changes in Equity and the Statement of Cash Flow dealt with bythis Report are in agreement with the books of account.
e) In our opinion the aforesaid Ind AS financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
f) On the basis of the written representations received from the directors as on March31 2019 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.
g) With respect to adequacy of internal financial controls over financial reporting ofthe Company and the operating effectiveness of such controls refer to our separate reportin Annexure B
h) 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 opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the company to its directors during the year is inaccordance with the provisions of section 197 of the Act.
i) In our opinion and to the best of our information and according to the explanationsgiven to us we report as under with respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules2014 in our opinion and to the best of our information and according to the explanationsgiven to us:
(i) The Company has disclosed the impact of pending litigations on its financialposition as referred to Note 33 to the Ind AS financial statements. (ii) The Company didnot have any long-term contracts including derivative contracts; as such the question ofcommenting on any material foreseeable losses thereon does not arise.
(iii) There has been no delay in transferring amounts which were required to betransferred to the Investor Education and Protection Fund by the
| ||For GMJ & Co |
| ||Chartered Accountants |
| ||(Firm's Registration No.: 103429W) |
| ||(CA S. Maheshwari) |
|Place : Mumbai ||Partner |
|Date : May 21 2019 ||Membership No.: 038755 |
Annexure A' to the Independent Auditors' Report
(Referred to in paragraph 9 under Report on Other Legal and RegulatoryRequirements' section of our report of even date)
i. (a) The company has maintained proper records showing full particulars includingquantitative details and situation of Property Plant and Equipment.
(b) Property Plant and Equipment have been physically verified by the management atregular intervals which in our opinion is reasonable having regard to the size of thecompany and the nature of its assets. No material discrepancies were noticed on suchphysical verification
(c) According to the information and explanation given to us and on the basis of ourverification title deeds of all immovable properties are held in the name of the company.
ii. As explained to us management has conducted physical verification of inventory atregular intervals during the year and no material discrepancies were noticed on suchphysical verification
iii. The Company has not granted any loan secured or unsecured to Companies FirmsLimited Liability Partnerships or other parties covered in the register maintained underSection 189 of the Act. Therefore the provisions of Clause 3 (iii)(a) (iii)(b) and(iii)(c) of the said Order are not applicable to the Company.
iv. In our opinion and according to the information and explanations given to usduring the year the Company has not granted any loans or provided any guarantees orsecurity in respect of any loans to any party covered under section 185 of the CompaniesAct 2013. In respect of loan has been given in the previous years the provision ofSection 186 of the Companies Act 2013 have been complied with.
v. In our opinion and according to the information and explanations given to us thecompany has not accepted any deposits from public within the meaning of Section 73 to 76of the Companies Act 2013 and the rules framed there under. vi. We have broadly reviewedthe books of account maintained by the company in the respect of the products wherepursuant to the Rules made by the Central Government the maintenance of Cost Records havebeen prescribed under section 148(1) of the Act and are of the opinion that prima faciethe prescribed accounts and records have been made and maintained.
We have not however made a detailed examination of the records with a view to whetherthey are accurate or complete. vii. (a) According to the information and explanation givento us and on the basis of our examination of our records of the Company in respect ofundisputed statutory dues including provident fund employees' state insurance incometax wealth tax sales tax service tax duty of customs duty of excise value added taxcess Goods and service tax and any other statutory dues have generally been regularlydeposited with the appropriate authorities.
According to the information and explanations given to us no undisputed amountspayable in respect of the aforesaid dues were in arrears as at March 31 2019 for a periodof more than six months from the date they became payable.
(b) According to the books of accounts and records as produced and examined by us inaccordance with the generally accepted auditing practices in India as at March 312019the following are the particulars of the dues that have not been deposited on the accountof dispute.
|Name of the Statute ||Nature of the Dues ||Amount ||Forum where dispute is pending ||Financial year to which the amount relates |
| || ||(Rs in lakhs) || || |
|Central Excise Act 1944 ||Excise Duty* ||496.15 ||Appellate Authority CESTAT ||2003-04 to 2016-17 |
|Customs Act 1962. ||Custom Duty ||30.49 ||Appellate Authority CESTAT ||2013-14 to 2014-15 |
|Income Tax Act 1961 ||Income Tax** ||454.00 ||Appellate Authority ITAT Ahmedabad ||2006-07 to 2012-13 |
|Income Tax Act 1961 ||Income Tax** ||88.99 ||Appellate Authority ITAT Ahmedabad ||2012-13 |
|Income Tax Act 1961 ||Income Tax** ||26.23 ||Appellate Authority ITAT Ahmedabad ||2013-14 |
|Income Tax Act 1961 ||Penalty Demand Income Tax ||133.55 ||CIT(A) ||2006-07 to 2009-10 |
|Income Tax Act 1961 ||Penalty Demand Income Tax ||123.69 ||CIT(A) ||2010-11 to 2011-12 |
* Out of the demand a sum of 14.48/- Lakhs was paid under protest.
**These amounts have already been paid by the Company.
viii. In our opinion and according to the information and explanations given to us theCompany has not defaulted in repayment of dues to banks during the year under audit. Thereare no dues to Financial Institution Government and the Company has not issued anydebentures.
ix. According to the information and explanations given to us and based on the recordsand documents produced before us during the year the company has not raised money by wayof initial public offer or further public offer and the term loans have been applied forthe purposes for which they were obtained.
x. To the best of our knowledge and belief and according to the information given tous no material fraud by the company or on the company by its officers or employees hasbeen noticed or reported during the year.
xi. According to the information and explanations given to us and based on the recordsand documents produced before us managerial remuneration has been paid by the company inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Companies Act 2013.
xii. As the company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it therefore the provisions of clause (xii) of paragraph 3 of the Order are notapplicable to the company.
xiii. According to the information and explanation given to us all transactions withthe related parties are in compliance with Sections 177 and 188 of the Companies Act2013. The details of such related party transactions have been disclosed in the financialstatements as required under Indian Accounting Standard (Ind AS) 24 Related PartyDisclosures.
xiv. According to the information and explanations given to us and based on the recordsand documents produced before us the company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the year.
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 underthe provisions of section 192 of Companies Act 2013.
xvi. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934
For GMJ & Co
(Firm's Registration No.: 103429W)
| ||(CA S. Maheshwari) |
|Place : Mumbai ||Partner |
|Date : May 21 2019 ||Membership No.: 038755 |
Annexure B' to the Auditors' Report
(Report on the Internal Financial Controls under Clause (f) of Sub-section 3 of Section143 of the Companies Act 2013 (the Act))
We have audited the internal financial controls over financial reporting of N RAgarwal Industries Limited (the Company) as of March 31 2019 inconjunction with our audit of the Ind AS financial statements of the Company for the yearended 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').
These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information 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 applicable to an 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 ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls overfinancial reporting was established and maintained and if such controls operatedeffectively 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 includedobtaining 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 auditor's judgment including the assessment of the risks ofmaterial misstatement 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 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 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 authorizations ofmanagement and directors of the company; and (3) Provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over 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 controls over reporting and such internalfinancial reporting were operating effectively as at March 312019 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance
Note on Audit of Internal Financial Controls Over Financial
Reporting issued by the Institute of Chartered Accountants of India.
| ||For GMJ & Co |
| ||Chartered Accountants |
| ||(Firm's Registration No.: 103429W) |
| ||(CA S. Maheshwari) |
|Place : Mumbai ||Partner |
|Date : May 21 2019 ||Membership No.: 038755 |