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Nestle India Ltd.

BSE: 500790 Sector: Agri and agri inputs
NSE: NESTLEIND ISIN Code: INE239A01016
BSE 00:00 | 26 Feb 16097.70 -16.65
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16075.00

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16287.20

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16010.00

NSE 00:00 | 26 Feb 16101.60 -12.30
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OPEN 16075.00
PREVIOUS CLOSE 16114.35
VOLUME 13733
52-Week high 18821.45
52-Week low 12588.95
P/E 74.53
Mkt Cap.(Rs cr) 155,214
Buy Price 16050.10
Buy Qty 1.00
Sell Price 16097.70
Sell Qty 16.00
OPEN 16075.00
CLOSE 16114.35
VOLUME 13733
52-Week high 18821.45
52-Week low 12588.95
P/E 74.53
Mkt Cap.(Rs cr) 155,214
Buy Price 16050.10
Buy Qty 1.00
Sell Price 16097.70
Sell Qty 16.00

Nestle India Ltd. (NESTLEIND) - Auditors Report

Company auditors report

TO

THE MEMBERS OF

NESTLE INDIA LIMITED

Report on the Audit of the Financial Statements Opinion

We have audited the financial statements of Nestle India Limited("theCompany") which comprise the balance sheet as at 31 December 2019 and the Statementof Profit and Loss (including Other Comprehensive Income) Statement of Changes in Equityand Statement of Cash Flows for the year then ended and notes to the financialstatements including a summary of the significant accounting policies and otherexplanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 ("Act") in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 December 2019 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs 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 financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.

Revenue Recongnition

See note 2 and 32 to the financial statements

The key audit matter How the matter was addressed in our audit
Revenue from the sale of goods is recognized at the moment when control has been transferred to the customer and is measured net of trade discounts rebates and pricing allowances to customers (collectively 'trade spends'). Our audit procedures included:
• We assessed the appropriateness of the revenue recognition accounting policies by comparing with applicable accounting standards.
There is a risk that revenue may be overstated because of fraud resulting from the pressure local management may feel to achieve performance targets. Revenue is also an important element of how the company measures its performance upon which management is incentivized. • We evaluated the design tested the implementation and operating effectiveness of key internal controls including general IT controls and key IT application controls over recognition of revenue.
The Company focuses on revenue as a key performance measure which could create an incentive for revenue to be recognized before control has been transferred. • We performed substantive testing by selecting samples of revenue transactions recorded during the year by testing the underlying documents which included invoices good dispatch notes customer acceptances and shipping documents (as applicable).
• We carried out analytical procedures on revenue recognised during the year to identify unusual variances.
• We tested on a sample basis specific revenue transactions recorded before and after the financial year end date to determine whether the revenue had been recognised in the appropriate financial period.
• We tested manual journal entries posted to revenue to identify unusual items.

Provision for Contingencies

See note 2 19 23 and 36 to the financial statements

The key audit matter How the matter was addressed in our audit
Provisions for Contingencies are recognized after evaluation of facts and legal aspects of the matter involved. Provisions are recognized when the Company has a present obligation (legal/ constructive) as a result of a past event for which it is probable that a cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Our audit procedures included:
• We tested the effectiveness of key controls around the recording and assessment of provisions for contingencies.
Provision for contingencies requires the Management to make judgements and estimates in relation to the issues and exposures arising from a range of matters relating to direct tax indirect tax claims general legal proceedings and other eventualities arising in the regular course of business. The key judgement lies in determining the likelihood and magnitude of an unfavorable outcome where the same may differ from the future obligations. By nature it is complex and includes many variables. • We used our subject matter experts wherever required to assess the value of material provisions in light of the nature of the exposures applicable regulations and related correspondence with the authorities.
• We challenged the assumptions and critical judgements made by management which impacted their estimate of the provisions required considering judgements previously made by the authorities in the relevant jurisdictions or any relevant opinions given by the Company's advisors and assessing whether there was an indication of management bias.
• We inquired the status in respect of significant provisions with the Company's internal tax and legal team.

Other Information

The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditor's reportthereon.

Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.

Management's Responsibilities for the Financial Statements

The Company's management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these financial statementsthat give a true and fair view of the state of affairs profit/loss and othercomprehensive income changes in equity and cash flows 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 of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the financial statements that give a true and fairview and are free from material misstatement whether due to fraud or error.

In preparing the financial statements management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

Board of Directors is also responsible for overseeing the Company's financial reportingprocess.

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 in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these 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 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 misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)

(i) of the Act we are also responsible for expressing our opinion on whether thecompany has adequate internal financial controls with reference to financial statements inplace and the operating effectiveness 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

• Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor'sreport unless law or regulation precludes public disclosure about the matter orwhen 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 the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.

(A) 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) the Statement of Cash Flows and Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account.

d) In our opinion the aforesaid financial statements comply with the Indian AccountingStandards prescribed under section 133 of the Act.

e) On the basis of the written representations received from the directors as on 31December 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 December 2019 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 with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B".

(B) 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 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations as at 31 December 2019on its financial position in its financial statements - Refer Note 36 and 43 to thefinancial statements.

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 disclosures in the financial statements regarding holdings as well as dealingsin specified bank notes during the period from 8 November 2016 to 30 December 2016 havenot been made since they do not pertain to the financial year ended 31 December 2019.

(C) With respect to the matter to be included in the Auditor's Report under section197(16) of the Act:

In our opinion and according to the information and explanations given to us theremuneration paid by the company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) of the Act whichare required to be commented upon by us.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W/W-100022
Place: Gurugram Jiten Chopra
Date: 13 February 2020 Partner
Membership No.: 092894
UDIN: 20092894AAAABV6340

Annexure - A to the Independent Auditor's Report of even date on the financialstatements of Nestle India Limited

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

(b) The Company has a regular programme of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner over a period of two years. In ouropinion the periodicity of physical verification is reasonable having regard to the sizeof the Company and the nature of its assets. As informed to us no material discrepancieswere noticed on such verification.

(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deed/transfer deed/conveyancedeed provided to us we report that the title deeds comprising all the immovableproperties of land and buildings which are freehold are held in the name of the Companyas at the balance sheet date. In respect of immovable properties of land and buildingsthat have been taken on lease and disclosed as fixed asset in the financial statementsthe lease agreements are in the name of the Company where the Company is the lessee inthe agreement.

(ii) The inventory except goods in transit and stock lying with third parties hasbeen physically verified by the management during the year. In our opinion the frequencyof such verification is reasonable. Confirmations have been obtained for stock lying withthird parties at the year end. According to the information and explanations given to usthe discrepancies noticed on physical verification of inventory as compared to bookrecords were not material and have been properly dealt with in the books of account.

(iii) The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Companies Act 2013. Accordingly clause 3(iii) of the order is notapplicable.

iv) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has not entered into anytransactions in respect of loans investments guarantees and security which are coveredunder section 185 of the Companies Act 2013.

The Company has complied with the provisions of Section 186 of the Companies Act 2013in respect of grant of loans making investments and providing guarantees and securitiesas applicable.

(v) According to the information and explanations given to us the Company has notaccepted any deposits covered under section 73 to 76 or any other relevant provisions ofthe Companies Act 2013 and the rules framed there under. Accordingly clause 3(v) of theOrder is not applicable.

(vi) We have broadly reviewed the records maintained by the Company pursuant to therules prescribed by Central Government for maintenance of cost records under sub section(1) of Section 148 of the Act and are of the opinion that prima facie the prescribedaccounts and records have been made and maintained. However we have not made a detailedexamination of the records.

(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including Provident Fund Employees' StateInsurance Income-tax Duty of Customs Goods and Services Tax Cess and other materialstatutory dues have been regularly deposited during the year by the Company with theappropriate authorities.

According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees' State Insurance Income-tax Duty ofcustoms Goods and Services Tax Cess and other material statutory dues were in arrears asat 31 December 2019 for a period of more than six months from the date they becamepayable.

(b) According to the information and explanations given to us except as stated inAppendix 1 there are no dues of Income-tax Goods and Services tax Sales tax Servicetax Duty of customs Duty of excise or Value added tax which have not been deposited onaccount of any dispute.

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of dues to its bankers. The Company did nothave any dues payable to any financial institutions government or debentures holdersduring the year.

(ix) The Company has not raised any money by way of initial public offer furtherpublic offer (including debt instruments) and term loans during the year. Accordingly theprovisions of clause 3(ix) of the Order are not applicable to the Company.

(x) According to the information and explanations given to us no material fraud by theCompany or no material fraud on the Company by its officers or employees has been noticedor reported during the year.

(xi) According to the information and explanations given to us and based on ourexamination of the records the Company has paid or provided for managerial remunerationin accordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Act.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly clause 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and based on ourexaminations of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable. The details of suchrelated party transactions have been disclosed in the financial statements as required byapplicable accounting standards.

(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly clause 3(xiv) of the Order is not applicable.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into noncashtransactions with directors or persons connected with him. Accordingly clause 3(xv) ofthe Order is not applicable.

(xvi) According to the information and explanations given to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W/W-100022
Place: Gurugram Jiten Chopra
Date: 13 February 2020 Partner
Membership No.: 092894
UDIN: 20092894AAAABV6340

Appendix 1 to the statement on the matters specified in paragraph vii(b) of theCompanies Auditors Report Order 2016

(' in Million)
Name of the Statute Nature of Dues Amount* Amount Paid under protest Period to which amount relates Forum where case is pending
Central excise Act 1944 Duty of Excise 61.2 15.5 1996-2004 Supreme Court
Central excise Act 1944 Duty of Excise 0.9 - 1994 High Court
Central excise Act 1944 Duty of Excise 0.5 - 2000 Commissioner
Customs Act 1962 Custom Duty 105.8 6.7 2008-2013 Commissioner
Goods and Services Tax Act Goods and Services Tax 731.5 - Nov-17 to Jun-18 National Anti-Profiteering Authority
The Finance Act 1994 Service Tax 417.1 4.6 2005-2007 2008 20102011 High Court
Central Sales Tax/ Value Added Tax Sales Tax/ VAT 114.1 2.5 1997-1998 2000-2006 2007-2009 2014-2015 High Court
Central Sales Tax/ Value Added Tax Sales Tax/ VAT 52.8 46.7 2004-2005 2006-2007 2010-2013 2014-15 Tribunal
Central Sales Tax/ Value Added Tax Sales Tax/ VAT 178.8 - 2005-2010 Appellate & Revisional Board
Central Sales Tax/ Value Added Tax Sales Tax/ VAT 7.5 1.9 2005- 2007 2008-2009 2011-2012 2014-15 Commissioner (Appeals)
Central Sales Tax/ Value Added Tax Sales Tax/ VAT 81.0 1.1 2004- 2005 2010-2012 2013-2014 Commissioner
Central Sales Tax/ Value Added Tax Sales Tax/ VAT 25.0 1.0 2014-15 Joint Commissioner (Appeals)
Central Sales Tax/ Value Added Tax Sales Tax/ VAT 88.3 5.2 2008-10 2013-16 Joint Commissioner
Central Sales Tax/ Value Added Tax Sales Tax/ VAT 9.5 2.4 2008-2009 2010-2011 2012-2014 2015-16 Additional Commissioner
Central Sales Tax/ Value Added Tax Sales Tax/ VAT 1.1 0.2 2007-2008 Assessing Officer
Income Tax Act 1961 Income Tax 1253.2 - 1996-2001 2004-2008 Supreme Court
Income Tax Act 1961 Income Tax 298.6 - 2000-2004 High Court
Income Tax Act 1961 Income Tax 3594.1 33.4 2006-2007 2008-2015 Income Tax Appellate Tribunal

* As per Demand orders

Annexure B referred to in our Independent Auditor's Report of even date on thefinancial statements of Nestle India Limited

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

Opinion

We have audited the internal financial controls with reference to financial statementsof Nestle India Limited ("the Company") as of 31 December 2019 in conjunctionwith our audit of the financial statements of the Company for the year ended on that date.

In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as at31 December 2019 based on the internal control with reference to financial statementscriteria 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").

Management's Responsibility for Internal Financial Controls

The Company's management and Board of Directors are responsible for establishing andmaintaining internal financial controls based on the internal control with reference tofinancial statements criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing issued by ICAI anddeemed to 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 with reference to financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the financialstatements 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 systemwith reference to financial statements.

Meaning of Internal Financial Controls with reference to Financial Statements

A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control withreference to financial statements includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures 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 with reference to FinancialStatements

Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to Financial Statements to future periods are subject to the risk that theinternal financial control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W/W-100022
Place: Gurugram Jiten Chopra
Date: 13 February 2020 Partner
Membership No.: 092894 UDIN: 20092894AAAABV6340

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