TO THE MEMBERS OF NATURAL CAPSULES LIMITED
We have audited the accompanying Standalone financial statements of M/S. NATURALCAPSULES LIMITED ("the Company'') which comprise the Balance Sheet as at 31stMarch 2020 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Statement of Cash Flows for the year ended on thatdate and a summary of the significant accounting policies and other explanatoryinformation (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 Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 312020 and its Profit total comprehensive income the changes in equity andits cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SA's) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thosestandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (ICAI) together with the independence requirements that are relevant to our audit ofthe financial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the ICAI's Code of Ethics. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
We draw attention to note no 48 of the financial statement with regard to "TheCompany has considered the possible effects that may arise out of the still unfoldingCOVID-19 pandemic on the carrying amounts of receivables intangible assets and Loans& Advances. For this purpose the Company has considered internal and external sourcesof information up to the date of approval of the Financial Results including creditreports and related information. Based on the current estimates the Company does notexpect any significant impact on such carrying values. The Company will continue toclosely monitor for any material changes to future economic conditions."
Our opinion on the Financial Statements is not modified in respect of the abovematters.
Key Audit Matters
Key audit matters are those matters that in our professional judgement 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. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|S. No ||Key Audit Matter ||How our audit addressed the key audit matter |
|1. ||Investment in Supreme Pharmaceuticals Mysore Pvt. Ltd ||Principal Audit Procedures |
| ||Refer Note No. 5 in the Financial Statement Investment of Rs.5.07 crores is carried at cost being long term investment. The company has not received any dividend since the investment made in FY 2015-16. As Significant judgment is required in determining the provision for diminution in the permanent value of the investment if any consequently having an impact on related accounting and disclosures in the standalone financial statements. ||Based on discussions with management and explanations given by management we are convinced that no provision for diminution in value is required. |
| || ||For those matters where the management concluded that no provision should be recorded we also considered the adequacy and completeness of the disclosure made in relation to the Diminution in the value of Investment. |
|2. ||Evaluation of uncertain Tax positions ||Obtained details of completed tax assessments and demands for the year ended March 312020 from management. |
| ||As described in the summary of Significant accounting policies in note no 2.2 Significant judgment is required in determining the provision for income taxes both current and deferred as well as the assessment of the provisions for uncertain tax positions consequently having an impact on related accounting and disclosures in the standalone financial statements. || |
| || ||Discussed with appropriate senior management and evaluated management's underlying key assumptions in estimating the tax provisions; |
| || ||We involved our internal experts to challenge the management's underlying assumptions in estimating the tax provision and the possible outcome of the disputes. |
| || ||Our internal experts also considered legal precedence and other rulings in evaluating management's position on these uncertain tax positions. |
|3. ||Trade receivables || |
| ||Trade receivables are recognized at their anticipated realizable value which is the original invoiced amount Valuation of trade receivables is a key audit matter in the audit due to size of the trade receivables balance and the high level of management judgement used in determining the impairment provision ||For trade receivables and managements estimation for trade receivables impairment provisions our key audit procedure includes the following; |
| || ||We obtained management confirmation on trade receivables outstanding |
| || ||We analyzed the ageing of trade receivables and |
| || ||We obtained the list of long outstanding receivables of these through enquiring with the management and by obtaining sufficient corroborative evidences to support the conclusions. |
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 Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance including other comprehensive income cash flows andchanges in equity of the Company in accordance with the Indian Accounting Standards (IndAS) prescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended and other accounting principles generally accepted inIndia. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due 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 concept basis of accountingunless management either intends to liquidate the company or to cease operations or hasno realistic alternative but to do so.
The Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the 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 highlevel of assurance but is not a guarantee that an audit conducted with SA's will alwaysdetect a material misstatement when it exists. Misstatements can arise from fraud or errorand are considered material if individually or in aggregate they could reasonably beexpected to influence the economic decisions of users taken on the basis of thesefinancial 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 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 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 alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships 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 of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure "A" statement on the matters specified in theparagraph 3 and 4 of the Order to the extent applicable.
2. As required by Section 143 (3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
(c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2020 from being appointed as a director in terms of Section164 (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 B" Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting and
(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 does not have any pending litigations which would impact its financialposition other than the items disclosed under Note No 45.
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.
For P. Chandrasekar LLP
Firm Registration No. 000580S/S200066
Membership No. 026037
UDIN No 20026037AAAACS4181
Date: 05th June 2020
Annexure to the Independent Auditors' Report
The Annexure referred to in our Independent Auditors' Report to the members of theCompany on the standalone financial statements for the year ended 31 March 2020 we reportthat:
i. a) The Company has maintained records of its fixed assets.
b) As explained to us the company is in the process of carrying out physicalverification of its fixed assets.
Adjustments if any which may arise on such verification shall be dealt with oncompletion of the verification.
c) According to the information and explanation given to us the title deeds in respectto immovable properties are held in the name of the company.
ii. Physical verification of inventory has been conducted at reasonable intervals bythe management and any material discrepancies were noticed have been properly dealt within the books of account.
iii. The Company not granted any loan to companies covered in the register maintainedunder section 189 of the Companies Act 2013 hence this clause is not applicable.
iv. The company has not granted any of loans investments guarantees and securityduring the year under provisions of section 185 and 186 of the Companies Act 2013 hencethis clause is not applicable
v. The company has not accepted any deposits accordingly this clause is not applicable.
vi. As per the information and explanations given to us the maintenance of cost recordshas not been prescribed by the Central Government under sub-section (1) of Section 148 ofthe Companies Act 2013.
vii. a) Undisputed statutory dues including investor education and protection fundsales-tax and other material statutory dues as applicable have been deposited generallyregularly with the appropriate authorities for provident fund employees' state insuranceincome-tax and service tax as applicable other than the following amount which has beendue
|Name of the Statue ||Amount in Rs. ||Period to which the amount relates |
|Karnataka VAT Act ||1492 ||2015-16 |
b) According to the information and explanation given to us there are no materialstatutory dues which have not been deposited on account of any dispute other than theamounts as listed below :
|Name of the Statue ||Nature of Dues ||Amount in Rs. ||Period to which the amount relates ||Forum where dispute is Pending |
|Service Tax ||Service Tax Payable ||2208074 ||Nov 2009 to Oct 2012 ||Commissioner of Central Excise |
|Service Tax ||Penalty on Service Tax Payable ||2208948 ||Nov 2009 to Oct 2012 ||Commissioner of Central Excise |
|Income Tax ||DDT - Short remittance ||1057860 ||April 2015 to March 2006 ||Deputy Commissioner of Income Tax |
viii. In our opinion and according to the information and explanations given to us theCompany has not defaulted in repayment of dues to a financial institution bank ordebenture holders.
ix. The company has not raised moneys by way of initial public offer or further publicoffer during the year and the company has not availed any new terms loans during the yearhence this clause is not applicable.
x. During the course of our examination of the books and records of the companycarried in accordance with the auditing standards generally accepted in India we haveneither come across any instance of fraud on or by the Company noticed or reported duringthe course of our audit nor have we been informed of any such instance by the Management.
xi. According to the information and explanation given to us the company has paidmanagerial remuneration in accordance with the requisite approvals mandated by theprovisions of section 197 read with Schedule- V of companies act 2013.
xii. The company is not a Nidhi company hence this clause not applicable.
xiii. All transactions with the related parties are in compliance with sections 177 and188 of Companies Act 2013 where applicable and the details have been disclosed in theFinancial Statements etc. as required by the applicable accounting standards.
xiv. The company has not issued any shares or Debentures during the year hence thisclause is not applicable.
xv. The company has not entered into any non-cash transactions with directors orpersons connected with him hence this clause not applicable
xvi. the company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934 hence this clause not applicable
For P. Chandrasekar LLP
Firm Registration No. 000580S/S20066
Membership No. 026037
UDIN No 20026037AAAACS4181
Date: 05th June 2020
Annexure - B to the Auditors' Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of NaturalCapsules Limited ("the Company") as of 31 March 2020 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
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'). 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 company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation 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 ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting 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 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 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 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 2020 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 P. Chandrasekar LLP
Firm Registration No. 000580S/S200066
Membership No. 026037
UDIN No 20026037AAAACS4181
Date: 05th June 2020.