To the Members of Nitin Spinners Limited
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion
We have audited the accompanying Financial statements of Nitin Spinners Limited(the Company) which comprise the Balance Sheet as at 31st March 2020 theStatement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date and asummary of the significant accounting policies and other explanatory information(hereinafter referred to as the financial statements).
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 CompaniesAct 2013 (the Act) in the manner so required and give a true and fair viewin conformity with the Indian Accounting Standards prescribed under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended (IndAs ) and other accounting principles generally accepted in India of the state ofaffairs of the Company as at 31st March 2020 the profit and total comprehensive incomechanges in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the Financial Statements in accordance with the Standards onAuditing (SAs) specified under section 143(10) of the Companies Act 2013 (theact). Our responsibilities under those Standards are further described in theAuditor's Responsibilities for the Audit of the 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 financial statements under theprovisions of the Act and the Rules made there under 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 financial statements.
Emphasis of Matter
We draw attention to Note No 43 to the Financial Statement which describes theeconomic consequences/disruption the Company is facing as a result of COVID-19 pandemicwhich is impacting consumer demand financial market etc.
Our opinion is not modified in respect of this matter.
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. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
|Key Audit Matter ||How the matter was addressed in our audit |
|1. Valuation of Inventories ||Our audit procedure: |
| The net carrying value of inventory as on 31st March 2020 is 16.09% of Total Assets of the company. || We have performed the Inventory physical stock count on sample basis. We performed inventory counts at location which is selected based on financial significance and risk and we performed the following procedures at each site: |
| Sales in the industry can be extremely volatile with consumer demand changing significantly (Seasonal) based on current trends. As a result there is a risk that the carrying value of inventory exceeds its net realisable value. |
|(i) Selected a sample of inventory items and compared the quantities we counted to the quantities recorded. |
|(ii) Observed a sample of management's inventory count procedures to assess compliance with Company's policy and |
|Hence we determined the valuation of inventories as a key audit matter. |
|(iii) Made inquiries regarding obsolete inventory items and inspected the condition of items counted. |
|Related Disclosures: |
|Please refer to Note-6 for details of the accounting policies of inventories and Note-6 of Notes to Financial Statements for relevant disclosures of inventories. || We have also evaluated a selection of controls over inventory existence across the company. |
| Examining the Company's historical trading patterns of inventory sold at full price and inventory sold below full price together with the related margins achieved for each product lines in order to gain comfort that stock has not been sold below cost. |
| || Evaluating the rationality of the inventory policies such as the policy of inventory valuation and provision for obsolescence and understanding whether the valuation of inventory was performed in accordance with the Company's policy. |
| || Analyzing the inventory aging report and net realizable value of inventories. |
| || Inspecting the post period sales situation and evaluating the net realizable value of measurement applied on aging inventory in order to verify the evaluation accuracy of the estimated inventory allowance by the Company and |
| || Assessing whether the disclosures of provision for inventory valuation are appropriate. |
|2. Trade Receivables ||Our Audit Procedure: |
| The recoverability of trade receivables and the level of provisions for doubtful debts are considered to be a significant risk due to the pervasive nature of these balances to the financial statements and the importance of cash collection with reference to the working capital management of the business. || Assessed the design and implementation of key controls around the monitoring of recoverability. |
| Discussed with the management regarding the level and ageing of trade receivables along with the consistency and appropriateness of receivables provisioning by assessing recoverability with reference to amount received in respect of trade receivables. |
| At 31st March 2020 the trade receivables balances (net of provisions) consist of 9.29% of the total amount of assets. Accordingly we determined audit of trade receivables as the key audit matter. || In addition we have considered the company's previous experience of bad debt exposure and the individual counter-party credit risk. |
| Tested these balances on a sample basis through agreement to post period end invoicing and cash receipt. |
|Related Disclosures: || The accuracy and completeness was verified through analytical reviews and balance confirmation. |
|Please refer to Note-19 of the accounting policies for details of the accounting policies of trade receivable. |
| Analyzing the aging schedule of trade receivable past collection records industry boom and concentration of customers' credit risk. |
|3. Revenue Recognition ||Our audit procedure: |
| Revenue is an important measure used to evaluate the performance of the Company. There is a risk that the revenue is presented for amounts higher than what has been actually generated by the Company. Consequently we considered revenue recognition to be a significant key audit matter. || Assessing the design implementation existence and operating effectiveness of internal control procedures implemented as well as test of details to ensure accurate processing of revenue transactions. |
| Inspecting underlying documentation for any book entries which were considered to be material on a sample basis. |
| Inspecting the key terms and conditions of agreements with major customers on a sample basis to assess if there were any terms and |
|Related Disclosures: |
|Please refer to Note-11 of the accounting policies for details of the accounting policies of revenue recognition and Note-39 of Notes to Financial Statements. ||conditions that may have affected the accounting treatment of the revenue recognition. |
| The accuracy and completeness of revenue was verified through cut-off test analytical reviews and balance confirmation. |
|4. Capital Expenditure ||Our audit procedures to assess Capital Expenditure include the following: |
|We focused on capital expenditure incurred during the year as this represents significant transaction for the year and involves certain judgmental areas such as capitalization of eligible components of cost as per applicable financial reporting standards; therefore we have identified this area as key audit matter. || We obtained an understanding of Company's process with respectto capital expenditure and tested controls relevant to such process. |
| We performed substantive audit procedures through inspection of related documents and supporting in relation to the capitalized cost. |
| We further assessed that the related disclosures provided in financial statements are adequate in accordance with applicable accounting standards and Companies Act 2013. |
|Related Disclosures: |
|Please refer to Note-2 of the accounting policies for details of the accounting policies of capital expenditure. |
|As disclosed in Note -3 to the financial statements the Company has incurred significant amount for the installation of new integrated textile unit during the year for the enhancement of its production capacity. || |
Information Other than the Financial Statements and Auditor's Report Thereon
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 CorporateGovernance and Shareholder's Information but does not include the financial statementsand our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained during the course of our audit or otherwise appearsto be materially misstated.
When we read the other information as identified above if we conclude that there is amaterial misstatement therein we are required to communicate the matter to those chargedwith governance.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 (the Act) with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance total comprehensive income changes in equity and cash flows of theCompany in accordance with the Ind AS and other accounting principles generally acceptedin India. 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 main tenance 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 financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
The Company's Board of Directors are responsible for overseeing The Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted 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 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 exists we are required to draw attention inour auditor's report to the related disclosures in the financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the financial statements thatindividually 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 audit work and in evaluating the results of our work; and(ii) to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit. We alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report 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) issuedby the Central Government in terms of Section 143(11) of the act we give inAnnexure I a statement on the matters specified in paragraph 3 and 4 of theOrder
2) 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 purpose of our audit;
(b) In our opinion and to the best of our information and according to the explanationsgiven to us proper books of accounts as required by law have been kept by the Company sofar as 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 financial statements comply with the Ind AS specifiedunder Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014
(e) On the basis of written representations received from the directors as on 31stMarch 2020 and taken on record by the Board of Directors none of the Directors aredisqualified as on 31st March 2020 from being appointed as a director in terms ofsection 164 (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 toAnnexure II' to this report.
(g) With respect to the other matter 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 in formation 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 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 financial statements. (Refer Note No.31)
ii. The Company did not have any long term contracts including derivative contractsfor which there were any material foreseeable losses.
iii. There are no amounts which are required to be transferred to the InvestorEducation and Protection Fund by the Company.
|For Kalani & Company. |
|Chartered Accountants |
|Firm Regn. No. 000722C |
|S.P. Jhanwar |
|Membership No.- 074414 |
|Place: Bhilwara |
|Date: 19th June 2020 |
to the Independent Auditor's Report
(Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Nitin Spinners Limited of even date)
i. In respect of the Company's fixed assets:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets (Property Plant & Equipment).
(b) The fixed assets (Property Plant & Equipment) have been physically verified bythe management at reasonable intervals. According to the information and explanationsgiven to us no material discrepancies were noticed on such verification.
(c) The title deeds of immovable properties are held in the name of company.
ii. Physical verification of inventory has been conducted during the year at reasonableintervals by management. As informed to us no material discrepancies have been noticed onsuch verification.
iii. The Company has not granted any loans secured or unsecured to any companiesfirms limited liability partnership or other parties covered in register maintained underSection 189 of the Companies Act 2013.
iv. No loans have been given to parties covered under section 185 of the Companies Act2013. The company has not given any guarantee or provided any security to any partycovered under section 185 or 186 of the Companies Act 2013. In case of investmentsprovisions of section 185 and 186 of the Companies Act 2013 has been complied.
v. The company has not accepted deposits from the public within the meaning of Sections73 to 76 of the Companies Act 2013 and the rules made there under hence this clause isnot applicable.
vi. The maintenance of cost records has been prescribed by the Central Government undersection 148(1) of the Companies Act 2013 and as informed to us such accounts and recordshave been so made and maintained. However we have not conducted a detailed examination ofthe same.
vii. According to the information and explanations given to us in respect of statutorydues:
(a) Undisputed statutory dues including provident fund employee state insuranceincome tax GST custom duty cess and other statutory dues have generally been regularlydeposited with the appropriate authorities and there are no undisputed dues outstanding ason 31st March 2020.
(b) Details of dues of Income Tax Goods and Service Tax Sales Tax Service TaxExcise Duty and Value Added Tax which have not been deposited as at 31st March 2020 onaccount of dispute are given below:
|. Name of Statute ||Nature of Dues ||Period ||Forum where the dispute is pending ||Gross Amount due (? in Lacs.) ||Amount deposited under protest/adjusted by tax authorities (? in Lacs.) ||Amount not deposited (? in Lacs.) |
|1. Central Excise ||Excise duty and Penalty ||2006-07 ||High Court Jodhpur ||9.25 ||9.25 ||Nil |
|2. Customs ||Redemption Fine ||2009-10 ||CESTAT Ahmedabad ||0.50 ||Nil ||0.50 |
|Total || || || ||9.75 ||9.25 ||0.50 |
viii. Based on our verification and according to the information and explanationsgiven by the management and also considering the relief/moratorium allowed by ReserveBank of India pursuant to Covid-19 pandemic the Company has not defaulted in therepayment of loans or borrowings to any banks and financial institutions. The Company didnot have any loans or borrowing in respect of Government or dues to debenture holdersduring the year
ix. The Company has not raised any money by way of initial public offer or furtherpublic offer. According to the information and explanation given to us the money raisedby the company by way of term loans have been applied for the purpose for which they wereobtained.
x. To the best of our knowledge and according to the information and explanations givento us no fraud by the Company or no material fraud on the Company by its officers oremployees has been noticed or reported during the year.
xi. In our opinion and according to the information and explanations given to us theCompany has paid/ provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.
xii. The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of theOrder is not applicable to the Company.
xiii. The Company has complied with Section 177 and 188 of the Companies Act 2013where applicable for all transactions with the related parties and the details of relatedparty transactions have been disclosed in the financial statements as required by theapplicable Indian Accounting Standards.
xiv. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures accordingly this clause isnot applicable.
xv. The Company has not entered into any non-cash transactions with its Directors orpersons connected to its directors and hence provisions of section 192 of the CompaniesAct 2013 are not applicable to the Company.
xvi. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
For Kalani & Company.
Chartered Accountants Firm Regn. No. 000722C
Membership No.- 074414
Place: Bhilwara Date: 19th June 2020
to the Independent Auditor's 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 with reference to financial statementsof Nitin Spinners Limited (the Company) as of 31st March 2020 in conjunctionwith our audit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls with reference to financial statements based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls over Financial Reporting issued by the Institute of Chartered Accountants ofIndia. These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.
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 on Audit of Internal Financial Controls OverFinancial Reporting (the Guidance Note) and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013 tothe extent applicable to an audit of internal financial controls both applicable to anaudit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate 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 over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material 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 withreference to financial statements.
Meaning of Internal Financial Controls over Financial Reporting
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 controlswith reference to Ind AS financial statements includes those policies and procedures that(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.
Inherent Limitations of Internal financial controls with reference to financialstatements
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 with reference to financial statements and such internal financialcontrols with reference to Ind AS financial statements were operating effectively as at31st March 2020 based on the internal financial controls with reference to Ind ASfinancial statements criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
For Kalani & Company.
Chartered Accountants Firm Regn. No. 000722C
Membership No.- 074414
Place: Bhilwara Date: 19th June 2020