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Neuland Laboratories Ltd.

BSE: 524558 Sector: Health care
NSE: NEULANDLAB ISIN Code: INE794A01010
BSE 15:50 | 19 Apr 2453.00 25.30
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NSE 15:46 | 19 Apr 2483.20 57.80
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OPEN 2303.00
PREVIOUS CLOSE 2427.70
VOLUME 10274
52-Week high 2543.10
52-Week low 371.00
P/E 58.59
Mkt Cap.(Rs cr) 3,147
Buy Price 0.00
Buy Qty 0.00
Sell Price 2480.00
Sell Qty 20.00
OPEN 2303.00
CLOSE 2427.70
VOLUME 10274
52-Week high 2543.10
52-Week low 371.00
P/E 58.59
Mkt Cap.(Rs cr) 3,147
Buy Price 0.00
Buy Qty 0.00
Sell Price 2480.00
Sell Qty 20.00

Neuland Laboratories Ltd. (NEULANDLAB) - Auditors Report

Company auditors report

To the Members of Neuland Laboratories Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of NeulandLaboratories Limited ("the Company") which comprise the standalone balancesheet as at March 31 2020 the standalone statement of Profit and Loss (including othercomprehensive income) the standalone statement of changes in equity and the standalonestatement of Cash Flows for the year then ended and notes to the standalone financialstatements including a summary of 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 Companies Act 2013 ("the Act') in the manner so required and give a true andfair view in conformity with the Indian Accounting Standards prescribed under section 133of the Act read with Companies (Indian Accounting Standards) Rules 2015 as amended("Ind AS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2020 the profit including othercomprehensive income changes in equity and its cash flows for the year ended on thatdate.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India (ICAI) togetherwith the ethical requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the Rules thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion.

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.

Sl. No Key Audit Matters How the Key Audit Matter was addressed in our audit
1 Impairment of Goodwill Our audit procedures in respect of this area included:
Refer Note 36 to the standalone financial statements Goodwill is tested for impairment on an annual basis. In determining the fair value/value in use of business reporting units the Company has applied judgment in estimating future revenues operating profit margins long-term growth rate and discount rates. 1. Obtained an understanding from the management with respect to process and controls followed by the Company to perform annual impairment test related to goodwill.
2. Assessed the Company's internal controls over preparation of annual budgets and future forecasts for the business as a whole and the approach followed for annual impairment test and key assumptions applied.
As at March 31 2020 Goodwill represents 22.73% of the Company's total assets and 39.61% of the Company's total shareholder's equity. The Company performed its annual impairment test of goodwill and determined that there was no impairment. 3. Assessed the reasonableness of the assumptions used and appropriateness of the valuation methodology applied and tested the discount rate and long-term growth rates used in the forecast including comparison to economic and industry forecasts where appropriate.
Due to significance of the above matter and involvement of the management estimate and judgement we have considered this as a key audit matter. 4. Assessed reasonableness of the future revenue and margins the historical accuracy of the Company's estimates and its ability to produce accurate long-term forecasts.
5. Compared the future operating cash flow forecasts with the business plan and budgets approved by the Board. 6. Assessed and validated the adequacy and appropriateness of the disclosures made by the management in the standalone financial statements.
7. Verification of compliance with Ind AS 36 - Impairment of Assets.
Sl. No Key Audit Matter How the Key Audit Matter was addressed in our audit
2 Assessment of COVID-19 Impact Our audit procedures in respect of COVID-19 impact assessment include but are not limited to:
The World Health Organization announced a global health emergency because of a new strain of coronavirus ("COVID-19") and classified its outbreak as a pandemic on March 11 2020. On March 24 2020 the Indian government announced a strict 21-day lockdown across the country to contain the spread of the virus which has been further extended upto May 31 2020. This pandemic and response are creating disruption in global supply chain and adversely impacting most of the industries which has resulted in global slowdown. 1. Testing the design and operating effectiveness of key controls (including application controls).
2. Testing of Application controls include testing of automated controls reports and system reconciliations.
3. Selecting samples based on quantitative and qualitative risk factors.
4. Verifying the sample selected to assess appropriate classification and provision amount as per extant policy.
5. Obtained an understanding of the basis of evaluation of the management.
Covid-19 has contributed to a significant decline and volatility in global and Indian economy. The management has made an assessment of the impact of COVID-19 on the Company's operations financial performance and position as at and for the year ended March 31 2020 and has concluded that there is no significant/material impact which is required to be recognised in the standalone financial statements. 6. Verifying the physical verification done by an independent auditor subsequent to year end and performing necessary roll back procedures to assess the existence of the inventory.
The full extent and duration of the impact of COVID-19 is currently unknown and the assessment made by the Company based on its estimates involves a significant amount of judgement including the duration and spread of the pandemic and any new information that may emerge concerning the severity of the virus its spread to other regions and the actions to contain the virus or treat its impact among others. Hence we have ascertained the assessment of the impact of Covid-19 as a Key Audit Matter.

Information Other than the Standalone Financial Statements and Auditor's Report Thereon

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe standalone financial statements and our auditor's report thereon.

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 in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.

Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial 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 includingother comprehensive income changes in equity and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards 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 wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatement that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone financial statements the Board of Directors is responsiblefor assessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless the Board of Directors either intends to liquidate the Company or tocease operations or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

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.

We give in "Annexure A" a detailed description of Auditor's responsibilitiesfor Audit of the Standalone Financial Statements.

Other Matter

The standalone Ind AS financial statements of the Company for the year ended March 312019 were audited by another auditor whose report dated May 16 2019 expressed anunmodified opinion on those statements.

Our opinion is not modified in respect of these matters.

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 "Annexure B" a statement on the matters specified inparagraphs 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) the Statement of Changes in Equity and the Statement of Cash Flow dealt with bythis Report are in agreement with the books of account;

(d) In our opinion the aforesaid standalone financial statements comply with theIndian Accounting Standards specified under Section 133 of the Act;

(e) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164(2) of theAct;

(f) With respect to the adequacy of the internal financialcontrolswithreferencetostandalone financial statements of the Company and the operatingeffectiveness of such controls refer to our separate Report in "Annexure C";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 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 on its financialposition in its standalone financial statements – Refer Note 39 to the standalonefinancial statements;

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

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

3. As required by The Companies (Amendment) Act 2017 in our opinion according toinformation explanations given to us the remuneration paid by the Company to itsdirectors is within the limits prescribed under Section 197 of the Act and the rulesthereunder.

For MSKA & Associates
Chartered Accountants
ICAI Firm Registration No. 105047W
Amit Kumar Agarwal
Partner
Place: Hyderabad INDIA Membership No. 214198
Date: May 22 2020 UDIN: 20214198AAAACP9078

  

ANNEXURE – A

TO THE INDEPENDENT AUDITOR'S REPORT ON EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTSOF NEULAND LABORATORIES LIMITED

Auditor's Responsibilities for the Audit of the Standalone 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 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 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 the Company hasinternal financial controls with reference to financial statements in place and theoperating 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 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.

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.

For MSKA & Associates
Chartered Accountants
ICAI Firm Registration No. 105047W
Amit Kumar Agarwal
Partner
Place: Hyderabad INDIA Membership No. 214198
Date: May 22 2020 UDIN: 20214198AAAACP9078

ANNEXURE – B

TO INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OFNEULAND LABORATORIES LIMITED FOR THE YEAR ENDED MARCH 31 2020

[Referred to in paragraph 1 under ‘Report on Other Legal and RegulatoryRequirements' in the Independent Auditors' Report]

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

(b) Fixed assets (Property Plant and Equipment) have been physically verified by themanagement during the year and no material discrepancies were identified on suchverification.

(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 according to the information and explanation given to us areunder dispute pending with Honorable High Court of Telangana as to the ownership of theproperty as stated in Note Note 39(f) to the financial statements:

Nature of Property Whether Leasehold/ Freehold Gross Block as at March 31 2020 Net Block as at March 31 2020 Remarks
Land Freehold 3.30 lacs 3.30 lacs The title deeds of the land are in the name of Neuland Health Sciences Private Limited erstwhile Company that was merged with the Company. Further the title deed of the land is under dispute in respect of which we have been informed by the management of the Company that they have filed a writ petition with Honourable High Court of Telangana.

ii. The inventory has been physically verified during the year by the management. Inour opinion the frequency of verification is reasonable. No material discrepancies werenoticed on verification between the physical stock and the book records.

iii. The Company has not granted any loans secured or unsecured to Companies FirmsLimited Liability Partnerships (LLP) or other parties covered in the register maintainedunder section 189 of the Companies Act 2013 (‘the Act'). Accordingly the provisionsstated in paragraph 3 (iii) (a) to (c) of the Order are not applicable to the Company.

iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 186 of the Act in respect ofinvestments made. Further in our opinion the Company has not entered into any transactioncovered under Section 185 and Section 186 of the Act in respect of loans guarantees andsecurity made.

v. In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public within the meaning of Sections 7374 75 and 76 of the Act and the rules framed there under. Accordingly the provisions ofclause 3(v) of the Order are not applicable.

vi. We have broadly reviewed the books of account relating to materials labour andother items of cost maintained by the Company pursuant as specified by the CentralGovernment for the maintenance of cost records under sub-section (1) of section 148 of theAct and we are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained. We have not however made a detailed examination of the recordswith a view to determine whether they are accurate or complete

vii. (a) According to the information and explanations given to us and the records ofthe Company examined by us in our opinion the Company is regular in depositing withappropriate authorities undisputed statutory dues including provident fund employees'state insurance income-tax goods and service tax duty of customs cess and any otherstatutory dues applicable to it.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax goods andservices tax duty of customs cess and other statutory dues were outstanding at the yearend for a period of more than six months from the date they became payable.

(c) According to the information and explanation given to us and the records of theCompany examined by us there are no dues of income tax goods and service tax customsduty cess and any other statutory dues which have not been deposited on account ofdisputes except for the following:

Name of the statute Nature of dues Amount in D lacs Period to which the amount relates Forum where dispute is pending
Income Tax Act 1961 Income Tax 18.13 FY 1997-1998
Income Tax Act 1961 Income Tax 81.64 FY 2000-2001 Hon'ble High Court of Telangana
Income Tax Act 1961 Income Tax 14.52 FY 2001-2002
Income Tax Act 1961 Income Tax 693.33 FY 2003-2004
Income Tax Act 1961 Income Tax 19.01 FY 2011-2012
Income Tax Act 1961 Income Tax 1357.45 FY 2012-13 to FY 2017-2018 Income Tax Appellate Tribunal

viii. In our opinion and according to the information and explanations given to us TheCompany has not defaulted in repayment of loans or borrowings to any financial institutionor bank during the year. Further 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 term loans during the year. Accordingly theprovisions stated in paragraph 3 (ix) of the Order are not applicable to the Company.

x. During the course of our audit examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employees.

xi. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with 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 the provisions stated in paragraph 3(xii) ofthe Order are not applicable to the Company.

xiii. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting 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 the provisions stated in paragraph 3 (xiv) of the Order are notapplicable to the Company.

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 non-cashtransactions with directors or persons connected with him. Accordingly provisions statedin paragraph 3(xv) of the Order are not applicable to the Company.

xvi. In our opinion the Company is not required to be registered under section 45-IAof the Reserve Bank of India Act 1934 and accordingly the provisions stated in paragraphclause 3 (xvi) of the Order are not applicable to the Company.

For MSKA & Associates
Chartered Accountants
ICAI Firm Registration No. 105047W
Amit Kumar Agarwal
Partner
Place: Hyderabad INDIA Membership No. 214198
Date: May 22 2020 UDIN: 20214198AAAACP9078
.