The Member of
Nagarjuna Fertilizers and ChemicalsLimited
Report on the Audit of the Standalone Financial Statements Opinion
We have audited the accompanying standalone financial statements of NagarjunaFertilizers and Chemicals Limited
("the Company") which comprise the Balance Sheet as at March 31 2019 theStatement 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 and asummary of the 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 explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the 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 the loss and totalcomprehensive income changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the standalone financial statements underthe provisions 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 audit opinion on the standalone financial statements.
Material Uncertainty Related to Going Concern
We draw attention to Note 35 in the financial statements the Company has incurred netloss of Rs.49064.41 Lakhs during the year ended March 312019 and the currentliabilities exceed the current assets by Rs. 147492.90 Lakhs as on March 312019.Duringthe year ended March 312019 the Company was unable to discharge its obligations forrepayment of Loans and settlement of other financial & nonfinancial liabilitiesincluding statutory liabilities. The Company's management is currently in discussion withthe lenders with a resolution plan and are hopeful of a positive response to theresolution plan from the lenders. These events and conditions indicate materialuncertainty which cast a significant doubt on the Company's ability to continue as a goingconcern and therefore may be unable to realise its assets and discharge its liabilitiesincluding potential liabilities in the normal course of business. The ability of theCompany to continue as going concern is solely dependent on the acceptance of debtrestructuring proposal which is not wholly within the control of the Company.
The financial statements of the Company have been prepared on going concern basis bythe management. The management is hopeful of a successful outcome of the resolution plansubmitted and accordingly no adjustments have been made to the carrying value of theassets and liabilities and their presentation/ classification.
Our opinion is not modified in respect of this matter.
Emphasis of Matter
Attention is invited to following notes to the Standalone Ind AS Financial Statements:
a) Note 5.1 regarding the provision for diminution in the value of investments made forthe value of Investment in Jaiprakash Engineering and Steel Company Limited (JESCO) asubsidiary and its adequacy based on Management assessment for the reasons stated in thesaid note
b) Note 25.1 regarding recognizing Income from urea operations including reimbursementclaims for additional fixed cost input escalation/de-escalation and for productionbeyond reassessed capacity based on prices and provisions applicable under NPS IIIModified NPS III pending notification of final prices under New Urea Policy 2015 andconsequential adjustments if any that may arise.
c) Note 38.1.1regarding Arbitration awards passed against the Company for USD15275688 GBP 690630 EURO 455000; the impact of which has not been recognised in theFinancial Statements for reasons stated in the said note;
Our opinion is not modified in respect of the above matters. 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.
In addition to the matter described in the Material Uncertainty Related to GoingConcern section we have determined the matters described below to be the key auditmatters to be communicated in our report. We have determined the matters described belowto be the key audit matters to be communicated in our report.
|Key Audit Matter ||Auditor's Response |
|1 Revenue Recognition ||Principal Audit Procedures |
|Sale of Products and Subsidy || We have assessed the Company's internal controls in respect of its revenue transactions; |
|To ensure accuracy of recognition measurement presentation and disclosures of revenues and related accounts. || We tested the key controls identified |
| || We performed substantive detail testing by selecting a sample of revenue transactions that we considered appropriate to test the evidence of effectiveness of the internal controls and adherence to accounting policies in recognising the revenue and the rebates and discounts there against. |
|Refer Note 25 of the Standalone Financial Statements || |
| || We have verified the notifications issued for the subsidy recognition classified under product and freight subsidy |
| || In respect of other components included in the subsidy income comprising escalation /de- escalation are based on management estimates and towards reimbursement of additional fixed costs etc are based on Modified NPS III Policy. We have reviewed the management estimates for recognising the income along with various correspondence made with the Government of India Department of Fertilisers and representations given to us. Since the amounts involved are significant and also involve certain uncertainties an emphasis of matter is given in our report under the Section Emphasis of Matter -Para (b). |
|2 Trade receivables ||Principal Audit Procedures |
|Receivables include receivable from sale of products as well as receivable from Government of India in the form of subsidy. || Our audit approach was a combination of test of internal controls and substantive procedures which included the following: |
| || In respect of Subsidy recognised as receivable from Government of India towards reimbursement of additional fixed costs and towards subsidy for production beyond reassessed capacity though the final prices are not notified. |
|As at March 31 2019 Trade Receivables amounting to '86267.90 Lakhs Includes subsidy and other dues '62346.25 Lakhs from Government of India and '13787.29 Lakhs from State Governments. || |
| || As no confirmation of balance is on record we have relied on the management's assertion on the recoverability an emphasis of matter is given in our report under the Section Emphasis of Matter -Para (b). |
|Refer Note 11 to the Standalone Financial Statements. || In respect of other receivables we have sent request for confirmation from the parties. The response to the request is not significant and hence reviewed the subsequent realisations and obtained representations from the management regarding the realisability. |
| || Ensured adequate provision for the long outstanding balances |
|3 Borrowings ||Principal Audit Procedures |
|Borrowings from Banks and Financial institutions. Account with the lenders had become a NPA and hence || Our audit approach was to carry out substantive and analytical procedures which included the following: |
| || Review of the sanction letters |
|To ensure || Review of the register of charge |
| adequate disclosure in terms of security offered || Verification of the loan statement from the lender and comparing with the books of account |
| || Recalculation of interest and outstanding |
| adequate disclosure for restructuring if any || Ensured adequate disclosure for the overdue balances classification of the outstanding balances in the financial statements. |
| repayment as per the sanctioned terms || |
| and accounting for the interest and penal charges including interest in case of defaults. || The company's inability to repay the lenders is referred to Note 35 of the financial statements and we have considered the same and reported the matter under Material Uncertainty Related to Going Concern section. |
|Refer Note 16 of the Standalone financial statements || |
|4 Contingent liabilities ||Principal Audit Procedures |
|The Company has material uncertain issues under the contingent liabilities of which some issues are under arbitration and other issues pending at various forums which involves significant judgment to determine the possible outcome of these issues. || Obtained details of contingent liabilities as at March 312019. |
| || Obtained status of each of the matters under litigation from the legal department. |
| || Review of Minutes of meetings of Board of Directors and Audit Committee. |
| || Discussion with the legal department on the steps being taken and the possible impact on the accounts for the year based on current progress of the matter. |
|Refer Note 38 of the Standalone financial statements || |
| || Since the amounts involved are significant an emphasis of matter is given in our report under the Section Emphasis of Matter -Para (c) based on legal and other precedents in evaluating management's position on these matters. |
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the standalone financial statements and our auditor's report thereon. The otherinformation is expected to be made available to us after the date of this auditor'sreport.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
When we read the other information furnished to us if we conclude that there is amaterial misstatement therein we are required to communicate the matter to those chargedwith governance and the shareholders.
Management's Responsibility for the Standalone 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 standalone 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 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 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.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalonefinancial 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 financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has an adequate internal financial controls system in place and the operatingeffectiveness 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 financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the 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 anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government 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 theOrder.
2. As required by Section 143(3) of the Act based on our audit we report that:
a. We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b. In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c. The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of account.
d. In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.
e. On the basis of the written representations received from the Directors as on March31 2019 taken on record by the Board of Directors of the Company none of the directorsis disqualified as on March 31 2019 from being appointed as a director in terms ofSection 164 (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 A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
g. With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended:
We report that the Excess over Minimum Remuneration paid to the Chairman and ManagingDirector for the year 2018-19 needs approval from the lenders before it is presented tothe ensuing AGM for its approval in accordance with the amended provisions of theCompanies Act 2013
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 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements.
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
For M BHASKARA RAO & Co
(Firm's Registration No. 000459S)
Hyderabad May24 2019
ANNEXURE A' TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Nagarjuna Fertilizers and ChemicalsLimited of even date)
i. In respect of the Company's fixed assets:
a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b. The Company has a program of verification to cover all the items of fixed assets ina phased manner which in our opinion is reasonable having regard to the size of theCompany and the nature of its assets. Pursuant to the program some of the fixed assetswere physically verified by the management during the year. According to the informationand explanations given to us no material discrepancies were noticed on such verification.
c. According to the information and explanations furnished to us and based on ourreview title deeds of its immovable properties are not held in the name of the Company inrespect of land to the extent of 340.11 acres in 104 cases situated in Nellore DistrictAndhra Pradesh which is in the possession of the Company pending registration of thetitles thereto in its name.
ii. According to the information and explanations furnished to us in respect of theCompany's inventories physical verification of inventories at plants and warehouses hasbeen conducted by the management at reasonable intervals during the year. In our opinionhaving regard to the nature of its business and location of its stocks the frequency ofverification is reasonable. Further the discrepancies noticed on such verificationbetween the physical stocks and the respective records were not material in relation tothe size of operations of the Company and the same have been properly dealt with in thebooks of account.
iii. According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the Register maintained under Section 189 of theCompanies Act 2013. Accordingly reporting under clause (a) (b) and (c) of paragraph3(iii) of the Order does not arise.
iv. According to the information and explanations furnished to us the Company has notgranted any loans nor made any investments or given any guarantees or securities duringthe year to any of the parties specified in Sections 185 and 186 of the Companies Act2013 except Moneys advanced to Nagarjuna Oil Refinery Limited pursuant to the CompositeScheme of Arrangement and Amalgamation which the Company has been legally advised doesnot come under the purview of the aforesaid sections.
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 Sections 73 7475 and 76 of the Act and the Rules framed thereunder to the extent notified. Accordinglyreporting under provisions of paragraph 3(v) of the Order does not arise.
vi. We have broadly reviewed the cost records maintained by the Company pursuant to theRules in force made by the Central Government under sub-section (1) of Section 148 of theCompanies Act 2013 and are of the opinion that prima facie the prescribed cost recordshave been made and maintained. We have however not made a detailed examination of thecost records with a view to determine whether they are accurate or complete.
vii. According to the information and explanations furnished to us
a) There were a few delays in depositing undisputed statutory dues including ProvidentFund Employees' State Insurance Income-tax GST Sales Tax Wealth Tax Service TaxCustoms Duty Excise Duty Value Added Tax Cess and other material statutory duesapplicable to it with the appropriate authorities and there were no amounts payable inrespect of the aforesaid undisputed statutory dues in arrears as at March 31 2019 for aperiod of more than six months from the date they became payable.
|Name of the Statute ||Nature of Dues ||Amount (Rs) ||Period to which the amount relates ||Due Date ||Date of Payment ||Remarks if any |
| || || ||NIL || || || |
b. Details of dues of Income Tax Sales Tax Service Tax Customs Duty Excise DutyValue added Tax which have not been deposited as on March 31 2019 on account of disputeare as below:
|Nature of Statute ||Nature of dues ||Amount (Rs. in Lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax ||Tax ||32.15 ||2012-13 ||ITA T- Hyd -TP Issue |
| || ||102 ||2013-14 ||ITA T- Hyd - TP Issue |
| || ||174 ||2014-15 ||CIT (A) - Hyd - TP Issue |
| || ||36.31 ||2010-11&2011- 12 ||High court - AP & Telangana- TDS on NR Payments u/s 195 |
|VAT & ||Tax ||7.92 ||2008-09 ||MH - VAT & CST |
|CST || ||0.78 ||2009-10 ||Ker- VAT |
| || ||6.93 ||2011-12 ||Ker- VAT |
| || ||139 ||2013-14 ||AP- CST |
| || ||463.72 ||2014-15 ||TN - VAT - WTG |
| || ||20.95 ||2015-16 ||AP - VAT |
|Central Excise ||Tax ||103 ||2009-10 & 2010-11 ||CESTAT - Bangalore - MI - issue |
| || || ||(Dec 2009 to July 2010) || |
|Customs Duty ||Tax ||17.45 ||2010-11 to 2012-13 ||CESTAT - Chennai - SAD issue CESTAT - Vishakhapatnam - |
| || ||107 ||2011-12 ||Customs Refund issue |
| || ||44 ||2010-11 to 2013-14 ||CESTAT- Hyderabad-Demurrage Charges Issue |
|Service ||Tax ||1.88 ||2014-15 ||CESTAT - Hyd - |
|Tax || ||18.74 ||2014-15 to 2016-17 ||2013-Commissioner Appeals - Vizag -Notice period |
| || ||6.06 ||2012-13 to 2015-16 ||Pay by Employee Commissioner Appeals- Visakhapatnam |
|Total || ||1281.89 || || |
viii. According to the information and explanations given to us and based on therecords examined by us the Company has defaulted in respect of repayment of loans orborrowings to financial institutions banks and government. Details are as under:
|Particulars ||Amount (Rs. in Lakhs) of default as at the Balance Sheet Date ||Period of Default ||Remarks if any |
|IDBI Bank ||7758.49 ||0-274 days || |
|SBI Bank ||5521.78 ||0-274 days || |
|ICICI Bank ||798.86 ||0-90 days || |
|UCO Bank ||80.86 ||0-91 days || |
|SBI Bank ||1511.41 ||0-274 days || |
|Department of Bio Technology ||171.69 ||0-305 days || |
|TOTAL ||15843.11 || || |
The Company did not have any outstanding debentures as at the date of the balancesheet.
ix. According to the information furnished to us during the year under report thecompany did not have any moneys raised from Initial Public Offering or Further PublicOffering that remained to be applied for the purposes for which they were raised. Thusreporting under Clause 3(ix) of the Order does not arise.
x. To the best of our knowledge and according to the information and explanationsfurnished to us no fraud by the Company and no material fraud on the Company by itsofficers or employees has been noticed or reported during the year.
xi. According to the information and explanations given to us and based on the recordsexamined by us We report that the Excess over Minimum Remuneration paid to the Chairmanand Managing Director for the year 2018-19 needs approval from the lenders before it ispresented to the ensuing AGM for its approval in accordance with the amended provisions ofthe Companies Act 2013
xii. The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of theOrder does not arise.
xiii. In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the Standalone Ind AS Financial Statements as requiredby the applicable Accounting Standards.
xiv. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly paid convertible debentures and hence reportingunder clause 3 (xiv) of the Order does not arise.
xv. In our opinion and according to the information and explanations furnished to usduring the year the Company has not entered into any non-cash transactions to which theprovisions of Section 192 of the Companies Act 2013 apply with its directors or personsconnected with them.
xvi. In our opinion based on the information and explanations furnished to us theCompany is not required to be registered under section 45-IA of the Reserve Bank of IndiaAct 1934.
For M BHASKARA RAO & Co
(Firm's Registration No. 000459S)
Hyderabad May 24 2019
ANNEXURE "B" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2(f) under 'Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Nagarjuna Fertilizers and ChemicalsLimited of even date)
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 NagarjunaFertilizers and Chemicals Limited ("the Company") as of March 31 2019 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
Management's Responsibility for Internal Financial Controls
The Board of Directors of the Company is 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. 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 respective 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 internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. 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 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 judgement 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 internal financial controls system overfinancial reporting of the Company.
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 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.
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 March 31 2019 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
| ||For M BHASKARA RAO & Co |
| ||Chartered Accountants |
| ||(Firm's Registration No. 000459S) |
| ||Anilkumar Mehta |
| ||Partner |
|Hyderabad May 24 2019 ||(Membership No.14284) |