NGL FINE-CHEM LIMITED
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of NGL FINE-CHEMLIMITED ("the Company") which comprise the Balance Sheet as at 31st March2019 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 Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at 31st March 2019 the profit and totalcomprehensive income changes in equity and its cash flows for the year ended on thatdate.
BASIS FOR OPINION
Weconducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the standalone financial statements.
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. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Key Audit Report ||How was the matter addressed in our audit |
|Revenue Recognition || |
|Revenue is recognised upon transfer of control of promised goods to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods. Revenue is measured based on transaction price which is the consideration adjusted for rebates discounts and incentives as also estimated sales returns. ||Our audit procedures among other things included the following: |
| || Considered the appropriateness of the Company's accounting policies regarding revenue recognition |
| || Testing controls automated and manual around dispatches/ deliveries/shipments inventory reconciliations and process of confirmation of receivable balances testing for cut-offs and analytical review procedures |
|Revenue is one of the key profit drivers and therefore accounting of revenue is considered as a key audit matter. [Refer Note 2.07 to the financial statements] || Assessed the disclosures in accordance with the requirements of Ind AS 115 on "Revenue from Contracts with Customers". |
|Valuation of inventories ||Our audit procedures among other things included the following. |
| || |
|The Company has complex product manufacturing process and thus the overhead absorption over each process is quite complex and more particularly to have the basis of absorption. || Evaluated the appropriateness of the basis applied to arrive at the overhead absorption rate; |
|The Company has worked out the overhead absorption cost rate based on the consumption of electricity of each process and apply the same for all other overheads. || Examined the workings of the absorption of over heads to arrive at the cost of inventories. |
|Due to significance of arriving at the overhead absorption rate for the valuation of inventories it is considered to be a key audit matter. || Our audit methodology involves process adopted to ascertain and evaluate the methods used are reasonable and absorbs overheads in an appropriate & logical manner. |
|[Refer Note 2.06 to the financial statements] || Assessed the disclosures in accordance with the requirements of Ind AS 2 on "Inventories". |
|Allowance for Expected Credit Loss of Trade Receivables ||Our audit procedures included among others the following : |
|Provision for impairment by way of Allowance for Expected Credit Loss (ECL) of Trade Receivables require - || Obtained sufficient and appropriate audit evidence about whether policies operational procedures internal control systems and other relative assumptions for estimation and determination of Allowance for ECL are reasonable. |
| the appropriateness of accounting policies for determination of Allowance for ECL; || |
| operational procedures and systems of internal control in estimation of ECL. || Objectively evaluated the estimates made in the broader context of the financial statements as a whole; |
| estimation of expected losses and appropriate assumptions and significant judgments on the recoverability of receivables; || Assessed the estimates and assumptions adopted by the Company in determining the need to recognise a provision and where applicable its amount |
| the completeness accuracy relevance and reliability of historical information; || Evaluated the completeness of disclosures in respect of Allowance for Expected Credit Loss. |
| the Company's overall review of the estimate; and || |
| the clarity and reasonableness of related ECL disclosures. In view of the determination of the basis and quantum of Allowance of ECL it is a significant item in the financial statements and hence considered to be a key audit matter. [Refer Note 2.15 to the standalone financial statements] || |
|Capital work-in progress/Property Plant and Equipment (PPE). ||Our audit procedures among other things included the following: |
|The Company had embarked on the project of setting up/ expansion of manufacturing plant at Tarapur. PPE have been capitalised and depreciation provided once the assets were ready to use || Assessed the design and tested the implementation and operating effectiveness of controls in respect of review of capital work in progress; |
|[Refer Note 2.08 to the financial statements] || Evaluated related documents for timing of capitalisation and recording of additions to items of various items of PPE and in case of projects determination of the cut-off date that is commencement of trial run for capitalisation. |
|Loss by fire ||Our audit procedures among other things included the following : |
|In June 2018 there was fire in the Company's new Plant at Tarapur thereby resulting in substantial loss of machinery and equipment. Manufacturing could be carried out up to 27th June2018 .The amount of loss by fire without considering replacement cost or loss of profit claim is 350.48Lakhs. ||Evaluated the appropriateness of the amount of loss by fire. |
| ||Verified the documents regarding the estimate of preliminary insurance claim prepared on the basis of professional advice received by the Company. |
|Preliminary insurance claim has been filed and final claim is being filed shortly. ||Assessed the disclosure made in the Financial Statements. |
|Due to significant amount of loss and the judgment in arriving that amount it is considered to be a key audit matter. || |
|Refer to Note 35 to the financial statement. || |
Information Other than the Standalone Financial Statements and Auditor's ReportThereon.
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the standalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
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 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 AccountingStandard) 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 financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional 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 also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by Section 143(3) of the Act based on our audit we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of account.
d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.
e) On the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors aredisqualified as on 31st March 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 over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended:
In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act.
h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
(i) The Company does not have any pending litigation which would impact its financialposition.
(ii) The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.
(iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
| ||For Manek & Associates |
| ||Chartered Accountants |
| ||Firm's registration number: |
| ||0126679W |
| ||sd/- |
| ||Shailesh Manek |
|Place : Mumbai ||Proprietor |
|Dated : 24th May 2019 ||Membership number.034925 |
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 NGLFINE-CHEM LIMITED ("the Company") as of 31st March 2019 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'). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired 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.
MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
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 the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
| ||For Manek & Associates |
| ||Chartered Accountants |
| ||Firm's registration number: |
| ||0126679W |
| ||sd/- |
| ||Shailesh Manek |
|Place : Mumbai ||Proprietor |
|Dated : 24th May 2019 ||Membership number.034925 |