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Natco Pharma Ltd.

BSE: 524816 Sector: Health care
NSE: NATCOPHARM ISIN Code: INE987B01026
BSE 00:00 | 18 Jul 778.20 -7.80
(-0.99%)
OPEN

785.40

HIGH

790.55

LOW

774.00

NSE 00:00 | 18 Jul 779.25 -9.95
(-1.26%)
OPEN

789.20

HIGH

792.70

LOW

774.00

OPEN 785.40
PREVIOUS CLOSE 786.00
VOLUME 5717
52-Week high 1061.95
52-Week low 671.25
P/E 20.57
Mkt Cap.(Rs cr) 14,358
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 785.40
CLOSE 786.00
VOLUME 5717
52-Week high 1061.95
52-Week low 671.25
P/E 20.57
Mkt Cap.(Rs cr) 14,358
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Natco Pharma Ltd. (NATCOPHARM) - Auditors Report

Company auditors report

To the Members of NATCO Pharma Limited

REPORT ON THE STANDALONE FINANCIAL STATEMENTS

1. We have audited the accompanying standalone financial statements of NATCO PharmaLimited (‘the Company') which comprise the Balance Sheet as at 31 March 2017 theStatement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofthe significant accounting policies and other explanatory information.

MANAGEMENT'S RESPONSIBILITY FOR THE STANDALONE FINANCIAL STATEMENTS

2. The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 (‘the Act') with respect to the preparation ofthese standalone financial statements that give a true and fair view of the state ofaffairs (financial position) profit or loss (financial performance including othercomprehensive income) cash flows and changes in equity of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (‘Ind AS') specified under Section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding the assets of the Company and for preventing and detecting fraudsand other irregularities; selection and application of appropriate accounting policies;making judgements and estimates that are reasonable and prudent; and designimplementation 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.

AUDITOR'S RESPONSIBILITY

3. Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

4. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

5. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthese standalone financial statements are free from material misstatement.

6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theauditor's judgement including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial controls relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.

7. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on these standalone financial statements.

OPINION

8. 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 Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India including Ind AS specified under Section133 of the Act of the state of affairs (financial position) of the Company as at 31 March2017 and its profit (financial performance including other comprehensive income) itscash flows and the changes in equity for the year ended on that date.

OTHER MATTER

9. The Company had prepared separate sets of statutory financial statements for theyear ended 31 March 2016 and 1 April 2015 in accordance with Accounting Standardsprescribed under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014 (as amended) on which we issued auditor's reports to the shareholders of theCompany dated 26 May 2016 and 22 May 2015 respectively. These financial statements havebeen adjusted for the differences in the accounting principles adopted by the Company ontransition to Ind AS which have also been audited by us. Our opinion is not modified inrespect of this matter.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

10. As required by the Companies (Auditor's Report) Order 2016 (‘the Order')issued by the Central Government of India in terms of Section 143(11) of the Act we givein the Annexure A a statement on the matters specified in paragraphs 3 and 4 of theOrder.

11. Further to our comments in Annexure A as required by Section 143(3) of the Act wereport that:

a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose 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 standalone financial statements dealt with by this report are in agreement withthe books of account;

d) in our opinion the aforesaid standalone financial statements comply with Ind ASspecified under Section 133 of the Act;

e) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2017 from being appointed as a director in terms of Section 164(2) of the Act;

f) we have also audited the internal financial controls over financial reporting of theCompany as on 31 March 2017 in conjunction with our audit of the standalone financialstatements of the Company for the year ended on that date and our report dated 30 May 2017as per Annexure B expressed an unqualified opinion;

g) 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 as detailed in note 37 to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position;

ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;

iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company;

iv. the Company as detailed in note 41 to the standalone financial statements hasmade requisite disclosures in these standalone financial statements as to holdings as wellas dealings in Specified Bank Notes during the period from 8 November 2016 to 30 December2016. Based on the audit procedures performed and taking into consideration theinformation and explanations given to us in our opinion these are in accordance with thebooks of account maintained by the Company.

For Walker Chandiok & Co LLP

Chartered Accountants

Firm's Registration No.: 001076N/N500013 per Adi P Sethna

Partner

Membership No.: 108840

Place: Hyderabad

Date: 30 May 2017

ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE TO THE MEMBERS OF NATCOPHARMA LIMITED ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2017

Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:

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

(b) The Company has a regular program of physical verification of its fixed assetsunder which fixed assets are verified in a phased manner over a period of three yearswhich in our opinion is reasonable having regard to the size of the Company and thenature of its assets. In accordance with this program certain fixed assets were verifiedduring the year and no material discrepancies were noticed on such verification.

(c) The title deeds of all the immovable properties (which are included under the head‘Property plant and equipment') are held in the name of the Company except for thefollowing property which is under dispute:

Nature of property Number of instances Gross block as at 31 March 2017 (` in million) Net block as at 31 March 2017(` in million)
Freehold land One 4 4

(ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year except for goods-intransit. No materialdiscrepancies were noticed on the aforesaid verification.

iii) The Company has granted interest free unsecured loans to a party covered in theregister maintained under Section 189 of the Act; and with respect to the same:

a. in our opinion the terms and conditions of grant of such loans are not prima facieprejudicial to the company's interest.

b. the schedule of repayment of principal has been stipulated wherein the principalamounts are repayable on demand and since the repayment of such loans has not beendemanded in our opinion repayment of the principal amount is regular;

c. there is no overdue amount in respect of loans granted to such party.

(iv) In our opinion the Company has complied with the provisions of Sections 185 and186 of the Act in respect of loans investments guarantees and security.

(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.

(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the Rules made by the Central Government for the maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's products/services andare of the opinion that prima facie the prescribed accounts and records have been madeand maintained. However we have not made a detailed examination of the cost records witha view to determine whether they are accurate or complete.

(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of customs duty of excise valueadded tax cess and other material statutory dues as applicable have generally beenregularly deposited to the appropriate authorities though there has been a slight delayin a few cases. Further no undisputed amounts payable in respect thereof were outstandingat the year-end for a period of more than six months from the date they became payable.

(b) The dues outstanding in respect of income-tax sales-tax service tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:

Name of the statute Nature of dues Total Claim (Amount in INR Million) Amount paid under protest Period to which the amount relates Forum where dispute is pending Honorable High
The Central Sales Tax Act 1956 Central sales tax 9 3 FY 1997-98 Court of Andhra Pradesh
The Customs Act 1962 Custom duty 2 - July 2006 to June 2010 CESTAT
The Finance Act 1994 Service Tax 2 1 FY 2011-12 CESTAT

(viii)The Company has not defaulted in repayment of loans or borrowings to any bank orfinancial institution during the year. The Company has no loans or borrowings payable togovernment and does not have any outstanding debentures during the year.

(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and did not have any term loans outstandingduring the year. Accordingly the provisions of clause 3(ix) of the Order are notapplicable.

(x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.

(xi) Managerial remuneration has been paid / provided by the Company in accordance withthe requisite approvals mandated by the provisions of Section 197 of the Act read withSchedule V to the Act.

(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.

(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements as required by the applicable accounting standards.

(xiv)During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.

(xv) In our opinion the Company has not entered into any non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act.

(xvi)The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.

For Walker Chandiok & Co LLP

Chartered Accountants

Firm's Registration No.: 001076N/N500013 per Adi P Sethna

Partner

Membership No.: 108840

Place: Hyderabad

Date: 30 May 2017

ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE TO THE MEMBERS OF NATCOPHARMA LIMITED ON THE STANDALONE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2017

Independent Auditor's report on the Internal Financial Controls under Section 143(3)(i)of the Companies Act 2013 ("the Act")

1. In conjunction with our audit of the standalone financial statements of NATCO PharmaLimited ("the Company") as of and for the year ended 31 March 2017 we haveaudited the internal financial controls over financial reporting (IFCoFR) of the Companyof as of that date.

MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

2. The Company's Board of Directors 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 (the ‘GuidanceNote'). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of the company's business including adherence to company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

AUDITOR'S RESPONSIBILITY

3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India (ICAI) and deemed to be prescribed undersection 143(10) of the Act to the extent applicable to an audit of IFCoFR and theGuidance Note. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate IFCoFR were established and maintained and if such controls operated effectivelyin all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR included obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's IFCoFR.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

6. A company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sIFCoFR includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.

OPINION

8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at 31 March 2017 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note.

For Walker Chandiok & Co LLP

Chartered Accountants

Firm's Registration No.: 001076N/N500013

per Adi P Sethna

Partner

Membership No.: 108840

Place: Hyderabad

Date: 30 May 2017