To the Members of Nikhil Adhesives Limited
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the standalone financial statements of Nikhil Adhesives Limited("the Company") which comprise the Balance Sheet as at 31st March 2020 and theStatement of Profit and Loss (including Other Comprehensive Income) Statement of Changesin Equity and Statement of Cash Flows for the year then ended and notes to the financialstatements including a summary of significant accounting policies and other explanatoryinformation (hereinafter referred to as "the standalone Ind AS financialstatements")
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind As financial statements give the informationrequired by 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 India of thestate of affairs of the Company as at March 31 2020 and its profit other comprehensiveloss 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 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 together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedis sufficient and appropriate to 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 Ind AS financial statements for the financialyear ended March 31 2020.
These matters were addressed in the context of our audit of the standalone Ind ASfinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report. For each key audit matter belowour description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities forthe audit of the standalone Ind AS financial statements section of our report includingin relation to this matter. Accordingly our audit included the performance of proceduresdesigned to respond to our assessment of the risks of material misstatement of thestandalone Ind AS financial statements. The results of our audit procedures including theprocedures performed to address the matter below provide the basis for our audit opinionon the accompanying standalone Ind AS financial statements.
Key Audit Matters
|Key audit matters ||How our audit addressed the key audit matters |
|Existence and condition of inventories of raw and packing material finished goods and stock in trade (Refer note 8 to the standalone Ind AS financial statements) ||We performed the following alternate audit procedures to audit the existence and condition of inventories as per the guidance provided in SA 501 "Audit Evidence Specific Considerations for Selected Items" as at the year-end since we were not able to physically observe the verification of inventories: |
|The Company has a policy of performing physical verification of inventories as per plan for all its locations throughout the year. Due to the restrictions imposed on account of COVID-19 the planned year end verification of the inventories was carried out subsequent to the year end which we could not observe physically. The total value of inventory as at 31st March 2020 is Rs.3668 lakhs. || The stocks physically verified by the management were reconciled with the perpetual inventory records maintained by the Company as on the date of the physical verification and in respect of the material items of the inventories carried out rolled back procedure to arrive at the stock quantities as at the balance sheet date. |
| || For stocks held at third party locations obtained direct confirmation of the inventory held by them as at the year-end. |
| || Performed additional alternate procedures which included inspection of supporting documentation relating to purchases sales and production records relating to inventory as at year-end. |
|Revenue recognition || |
|Revenue is one of the key profit drivers. Cut off is the key assertion in so far as revenue recognition is concerned since an inappropriate cut-off can result in material misstatement of results for the year. The issue assumed more importance this year due to COVID 19 related transportation constraints towards the end of the year. Increased risk of non recovery of debts in retail segment. ||The issue was addressed in our audit by audit procedures with regard to revenue recognition that included testing controls around dispatches/deliveries substantive testing for cut -offs and analytical review procedures. |
| ||The issue was addressed by performance of more extensive procedures to establish the recoverability of the debts including realizations subsequent to the balance sheet date and considered the market pulse from the sales and marketing team of the Company |
The Company's Board of Directors is responsible for the other information. The otherinformation comprises of the Annual Report but does not include the standalone Ind ASfinancial statements and our auditor's report thereon. The other information is expectedto be made available to us after the date of this auditor's report.
Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon. In connectionwith our audit of the standalone Ind AS financial statements our responsibility is toread the other information identified above when it becomes available and in doing soconsider whether such other information is materially inconsistent with the standalone IndAS financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated. When we read such other information if we conclude that there is amaterial misstatement therein we are required to communicate the matter to those chargedwith governance and to comply with the relevant applicable requirements of the standard onauditing for auditor's responsibility in relation to other information in documentscontaining audited financial statements. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for Standalone Ind ASFinancial 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 ofthe standalone financial statements that give a true and fair view of the financialposition financial performance total comprehensive income changes in equity and cashflows of the Company in accordance with the Indian Accounting Standards prescribed undersection 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015as amended and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror. In preparing the financial statements the Board of Directors 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 unlessthe Board of Directors either intends to liquidate the Company or to cease operations orhas 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 Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial 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 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 standalone Ind ASfinancial 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 Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls with reference to financialstatements in place 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 standalone Ind AS financialstatements for the financial year ended 31st March 2020 and are therefore thekey audit matters.
We describe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.
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 Companies Act 2013 we give in the "Annexure A" a statement on thematters specified in paragraphs 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 Cash Flow Statement 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 Companies (IndianAccounting Standards) Rules 2015 as amended.
(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 with reference to standalone Ind AS financial statements and theoperating effectiveness of such controls refer to our separate Report in "AnnexureB".
(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 opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of section 197 of the Act read with Schedule V to 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 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 Ind AS financial statements Refer Note 41 to the financialstatements.
(ii) The Company does not have any long-term contracts including derivative contractsoutstanding as on the balance sheet date. Hence disclosure of any foreseeable losses inrespect thereof is not applicable.
(iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund (IEPF Fund) by the Company. However there hasbeen delay of 10 days in transferring 15325 equity shares of nominal value Rs 153250/-which were required to be transferred to the IEPF Fund pursuant to Section 124(6) of theAct for Financial Year 2011-12.
For PHD & Associates
Firm Registration No.111236W
Membership No.: 38220
Date: 30th July 2020
Annexure A - Referred to in paragraph 1 under Report on Other Legal andRegulatory Requirements' section of our Independent Auditors' Report of even date to themembers of Nikhil Adhesives Limited on the standalone Ind AS financial statements for theyear ended 31 March 2020:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets were physically verified during the year by the Management atreasonable intervals. According to the information and explanations given to us nomaterial discrepancies were noticed on such verification.
(c) According to the information and explanations given to us and the records examinedby us we report that the title deeds of immovable properties are held in the name of theCompany. In respect of immovable properties that have been taken on lease and disclosed asfixed assets in the financial statements the lease agreements are in the name of theCompany.
(ii) The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on such physicalverification.
(iii) According to the information and explanations given to us in respect ofunsecured loan granted to a company covered in the register maintained under Section 189of the Companies Act 2013 (the Act') in our opinion the terms and conditions ofthe grant of such loan is not prejudicial to the Company's interest. The loan has beenrepaid during the year and interest has been received as stipulated.
(iv) In our opinion and according to the information and explanations given to us inrespect of loans investments guarantees and security where applicable the provisionsof Section 185 and 186 of the Companies Act 2013 have been complied with by the Company.
(v) In our opinion and according to the information and explanations given to us theCompany has accepted deposits during the year and complied with the provisions of Sections73 to 76 and other relevant provisions of the Companies Act 2013 and the rules framedthere under as applicable.
(vi) The maintenance of cost records have been specified by the Central Governmentunder section 148(1) of the Companies Act 2013. We have broadly reviewed the cost recordsmaintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014as amended prescribed by the Central Government under sub-section (1) of the Section 148of the Companies Act 2013 and are of the opinion that prima facie the prescribed costrecords have been made and maintained. We have however not made a detailed examinationof the cost records with a view to determine whether they are accurate or complete.
(vii) (a) According to the information and explanations given to us and on the basisof our examination of the books of account the Company has been generally regular indepositing with the appropriate authorities undisputed statutory dues including IncomeTax Goods and Service Tax cess and other statutory dues as applicable and as at March31 2020 there were no undisputed dues payable for a period of more than six months fromthe date of becoming payable.
(b)According to the information and explanations given to us there are no dues ofIncome tax or Sales tax or Value Added Tax or Service Tax or Custom Duty or Excise Duty orCess or GST which have not been deposited on account of disputes except following:
|Statute ||Financial Year ||Dispute Forum ||Amount(Rs) |
|Income Tax ||2016-17 ||Commissioner of Income Tax Appeals-CIT-(Appeal) ||171509 |
|Sales Tax ||2003-04 ||Deputy Commissioner of Sales Tax (Appeal) ||10302746 |
(viii) According to the information and explanations given to us the Company has notdefaulted in the repayment of loans or borrowings to the banks. The Company has notavailed any loan or borrowing from financial institutions or government and has not issueddebentures.
(ix) According to the information and explanations given to us the Company has neitherraised money by way of initial public offer or further public offer (including debtinstruments). The term loans taken by the Company were applied for the purposes for whichthey were taken.
(x) To the best of our knowledge and belief and according to the information andexplanations given to us no fraud by the Company and no fraud on the Company by itsofficers or employees has been noticed or reported during the year.
(xi) In our opinion and according to the information and explanations given to us themanagerial remuneration has been paid in accordance with the requisite approvals mandatedby the provisions of Section 197 read with Schedule V to the Act.
(xii) In our opinion the Company is not a Nidhi company. Therefore the provisions ofclause 3(xii) of the Order are not applicable to the Company and reporting under thisclause is not applicable.
(xiii) In our opinion and according to the information and explanations given to usall transactions with related parties are in compliance with sections 177 and 188 of theAct where applicable and details of related party transactions have been disclosed inthe financial statements as required by the applicable Indian Accounting Standards (IndAS).
(xiv) The Company has not made any preferential allotment or private placement ofshares or issued fully or partly convertible debentures during the year under review.
(xv) According to the information and explanations given to us the Company has notentered into any non-cash transactions with its Directors or persons connected to itsDirectors.
(xvi) According to the information and explanations given to us the Company is notNBFC and hence the Company is not required to be registered under section 45-IA of theReserve Bank of India Act 1934. Therefore reporting under this clause is not applicableto the Company.
For PHD & Associates
Firm Registration No.111236W
Membership No.: 38220
Date: 30th July 2020
Referred to in paragraph 2(f) under Report on Other Legal and RegulatoryRequirements' section of our Independent Auditors' Report of even date to the members ofNikhil Adhesives Limited on the financial statements for the year ended March 31 2020.
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 NikhilAdhesives Limited ("the Company") as at March 31 2020 in conjunction withour audit of the standalone Ind AS financial statements of the Company for the year endedon that date.
Management's Responsibility for Internal Financial Controls
1. 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 FinancialReporting' issued 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 Act.
2. Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to the standalone Ind AS financialstatements based on our audit. We conducted our audit in accordance with the Guidance Noteon Audit of Internal Financial Controls Over Financial Reporting (the GuidanceNote') and the Standards on Auditing deemed to be prescribed under section 143(10) of theAct to the extent applicable to an audit of internal financial controls both applicableto an audit of Internal Financial Controls and both issued by the ICAI. Those Standardsand the Guidance Note require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting with reference to the standalone Ind AS financialstatements was established and maintained and if such controls operated effectively in allmaterial respects.
3. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls over financial reporting with reference to thestandalone Ind AS financial statements and their operating effectiveness. Our audit ofinternal financial controls over financial reporting with reference to the standalone IndAS financial statements included obtaining an understanding of internal financial controlsover financial reporting assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgment including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.
4. 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 with reference to theStandalone Ind AS Financial Statements
5. A Company's internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A Company's internal financial control overfinancial reporting with reference to the financial statements includes those policies andprocedures that:
(a) Pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Company;
(b) Provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the Company are being made only inaccordance with authorizations of management and directors of the Company; and
(c) Provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the Company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting withreference to the Standalone Ind AS Financial Statements
6. 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 with reference to the standalone Ind AS financial statements to future periodsare subject to the risk that the internal financial control over financial reporting maybecome inadequate because of changes in conditions or that the degree of compliance withthe policies or procedures may deteriorate.
7. 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 with reference to the standalone Ind AS financial statements wereoperating effectively as at March 31 2020 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India.
For PHD & Associates
Firm Registration No.111236W
Membership No.: 38220
UDIN : 20038220AAAABE8868
Date: 30th July 2020