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Novartis India Ltd.

BSE: 500672 Sector: Health care
NSE: NOVARTIND ISIN Code: INE234A01025
BSE 13:34 | 16 Sep 621.10 3.10
(0.50%)
OPEN

621.05

HIGH

627.00

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618.00

NSE 05:30 | 01 Jan Novartis India Ltd
OPEN 621.05
PREVIOUS CLOSE 618.00
VOLUME 2226
52-Week high 936.95
52-Week low 558.00
P/E 68.48
Mkt Cap.(Rs cr) 1,534
Buy Price 621.10
Buy Qty 19.00
Sell Price 623.00
Sell Qty 26.00
OPEN 621.05
CLOSE 618.00
VOLUME 2226
52-Week high 936.95
52-Week low 558.00
P/E 68.48
Mkt Cap.(Rs cr) 1,534
Buy Price 621.10
Buy Qty 19.00
Sell Price 623.00
Sell Qty 26.00

Novartis India Ltd. (NOVARTIND) - Auditors Report

Company auditors report

To the Members of Novartis India Limited

Report on the Audit of the Financial Statements

Opinion

We have audited the accompanying financial statements of Novartis IndiaLimited ("the Company") which comprise the Balance Sheet as at 31stMarch 2019 and the Statement of Profit and Loss (including Other Comprehensive Income)the Statement of Cash Flows and the Statement of Changes in Equity for the year thenended and a summary of significant accounting policies and other explanatory information.In our opinion and to the best of our information and according to the explanations givento us the aforesaid financial statements give the information required by the CompaniesAct 2013 ("the Act") in the manner so required and give a true and fair view inconformity 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 2019 and its profit total comprehensive incomeits cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of the financial statements in accordance withthe Standards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibility for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India (ICAI) together with the ethical requirements that arerelevant to our audit of the financial statements under the provisions of the Act and theRules made thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the ICAI's Code of Ethics. We believe that theaudit evidence obtained by us is sufficient and appropriate to provide a basis for ouraudit opinion on the financial statements.

Key Audit Matter

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters. We have determined the matter described below to be the key audit matter tobe communicated in our report.

Key Audit Matter Auditor's Response
Revenue recognition – Sale of products Assessed the appropriateness of the Company's revenue recognition policies by mapping them with the applicable accounting standards.
[Note 1(J) to the financial statements]
The nature of operations of the Company being driven by trading activities the focus of internal reporting as well as of external stakeholders is on revenue which could be a causal factor to record revenues for sales that either did not occur or for which the revenue recognition criteria may not have been met. This risk is furthered considering that the Company sells its products across the country through wide spread distribution points. We have therefore specifically focused on the said risk and have considered this to be a key audit matter. Performed a walkthrough of the revenue business cycle to gain an understanding of the relevant risks and controls around occurrence and timing of revenue recognition. We also tested the design implementation and operating effectiveness of the relevant controls.
Tested transactions on a sample basis by agreeing sales with the invoices purchase orders and delivery documents comparing the invoice prices to the Company price lists agreeing the revenue amount recorded by management to underlying accounting records. We also reviewed the contracts / purchase orders as applicable to assess the terms of sale and confirmed that the sales were recorded in the correct accounting period.
Key Audit Matter Auditor's Response
We sought confirmations from customers on a test check basis and checked realisation / performed other alternate procedures where applicable to support the assertion that revenue has been recognised for sales that has occurred during the year.
We made enquiries of the management and obtained written representations as to whether there exist any side agreements or unusual arrangements which may impact revenue recognition.
We also reviewed variations in revenue over the corresponding period checked subsequent sales returns and tested any unusual transactions to determine whether the information corroborates with the revenue recorded in the books of account.

Information Other than the Financial Statements and Auditor'sReport Thereon

The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the BusinessResponsibility Report

Directors' report including annexures to the Directors'Report and Report on Corporate

Governance but does not include the financial statements and ourauditor's report thereon.

Our opinion on the financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained during the course of our audit or otherwise appears to be materiallymisstated.

If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the Ind AS and other accounting principles generally accepted in India.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding the assets of the Company and forpreventing 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 financial statements management 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 management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.

Auditor's Responsibility for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether thefinancial 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. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influencethe economic decisions of users taken on the basis of these financial statements. As partof an audit in accordance with SAs we exercise professional judgment and maintainprofessional 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 control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls system in place and theoperating effectiveness of such controls.

Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by the management.

Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause theCompany to cease to continue as a going concern.

Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

Materiality is the magnitude of misstatements in the financialstatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and

(ii) to evaluate the effect of any identified misstatements in thefinancial statements.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

1. As required by section 143(3) of the Act based on our audit wereport that:

a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.

b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.

c) The Balance Sheet the Statement of Profit and Loss including OtherComprehensive Income the Statement of Cash Flows and Statement of Changes in Equity dealtwith by this Report are in agreement with the books of account.

d) In our opinion the aforesaid financial statements comply with theInd AS specified under section 133 of the Act.

e) On the basis of the written representations received from thedirectors as on

31st March 2019 taken on record by the Board of Directors none of thedirectors is disqualified as on 31st March 2019 from being appointed as a director interms of section 164(2) of the Act. f) With respect to the adequacy of the internalfinancial controls over financial reporting of the Company and the operating effectivenessof such controls refer to our separate Report in "Annexure A". Our reportexpresses an unmodified opinion on the adequacy and operating effectiveness of theCompany's internal financial controls over financial reporting.

g) With respect to the other matters to be included in theAuditor's Report in accordance with the requirements of section 197(16) of the Actas amended in our opinion and to the best of our information and according to theexplanations given to us the remuneration paid by the Company to its directors during theyear is in accordance with the provisions of section 197 of the Act.

h) With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 as amended in our opinion and to the best of our information and according tothe explanations given to us:

i. The Company has disclosed the impact of pending litigations on itsfinancial position in its financial statements – Refer Note 27(A) to the financialstatements;

ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses.

iii. There has been no delay in transferring amounts required to betransferred to the 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) ofthe Act we give in "Annexure B" a statement on the matters specified inparagraphs 3 and 4 of the Order.

For Deloitte Haskins & Sells LLP

Chartered Accountants (Firm's Registration No. 117366W/W-100018)

Rakesh N. Sharma Partner (Membership No. 102042)

Place : Mumbai Date : 23rd May 2019

Annexure "A" to the Independent Auditor's Report

(Referred to in paragraph 1(f) under ‘Report on Other Legal andRegulatory Requirements' section of our report of even date to the Members ofNovartis India Limited on the financial statements for the year ended 31st March 2019)

Report on the Internal Financial Controls Over Financial Reportingunder Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")

We have audited the internal financial controls over financialreporting of Novartis India Limited ("the Company") as of 31st March 2019 inconjunction with our audit of the financial statements of the Company for the year endedon that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing andmaintaining internal financial controls 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. 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 safeguardingof its 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.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting of the Company based on our audit. Weconducted our audit in accordance with the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting (the "Guidance Note") issued by the Instituteof Chartered Accountants of India and the Standards on Auditing prescribed under Section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls. 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 over financial reporting were established andmaintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting 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 judgement including the assessment ofthe risks of material misstatement of the financial statements whether due to fraud orerror.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over FinancialReporting

Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion to the best of our information and according to theexplanations given to us 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 thecriteria for internal financial control over financial reporting established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India.

For Deloitte Haskins & Sells LLP

Chartered Accountants (Firm's Registration No. 117366W/W-100018)

Rakesh N. Sharma Partner (Membership No. 102042)

Place : Mumbai Date : 23rd May 2019

Annexure "B" to the Independent Auditor's Report

(Referred to in paragraph 2 under ‘Report on Other Legal andRegulatory Requirements' section of our report of even date to the Members ofNovartis India Limited on the financial statements for the year ended 31st March 2019)

(i) In respect of its fixed assets:

(a) The Company has maintained proper records showing full particularsincluding quantitative details and situation of the fixed assets.

(b) The Company has a program of verification to cover all the items offixed assets in a phased manner over a period of three years which in our opinion isreasonable having regard to the size of the Company and the nature of its assets. Pursuantto the program certain fixed assets were physically verified by the management during theyear. According to the information and explanations given to us no material discrepancieswere noticed on such verification.

(c) According to the information and explanations given to us therecords examined by us and based on the examination of registered sale deeds/sharecertificate provided to us we report that the title deeds comprising all the immovableproperties of buildings are held in the name of the Company as at the balance sheet date.

(ii) As explained to us the inventories were physically verifiedduring the year by the Management at reasonable intervals except for inventories lying atthird party locations for which confirmations have been obtained by the Management andgoods in transit. No material discrepancies were noticed on physical verification.

(iii) The Company has not granted any loans secured or unsecured tocompanies firms Limited Liability Partnerships or other parties covered in the registermaintained under section 189 of the Companies Act 2013 ("the Act") hencereporting under clause

(iii) of paragraph 3 of the Order is not applicable.

(iv) The Company has not granted any loans made investments orprovided guarantees or securities hence reporting under clause

(iv) of paragraph 3 of the Order is not applicable.

(v) According to the information and explanations given to us theCompany has not accepted any deposit during the year. The Company does not have unclaimeddeposits as at 31st March 2019 and accordingly the provisions of sections 73 to 76 orany other relevant provisions of the Act are not applicable to the Company.

(vi) The maintenance of cost records has not been specified by theCentral Government under section 148(1) of the Act.

(vii) According to the information and explanations given to us inrespect of statutory dues:

(a) The Company has generally been regular in depositing undisputedstatutory dues including Provident Fund Income-tax Goods and Services Tax Customs

Duty Cess and other material statutory dues applicable to it with theappropriate authorities.

(b) There were no undisputed amounts payable in respect of ProvidentFund Income-tax Goods and Services Tax Customs Duty Cess and other material statutorydues in arrears as at 31st March 2019 for a period of more than six months from the datethey became payable.

(c) Details of dues of Income-tax Sales Tax Service Tax CustomsDuty Excise Duty and Value Added Tax which have not been deposited as on 31st March2019 on account of disputes are given below:

Name of the statute Nature of dues Forum where the dispute is pending Period to which the amount relates Amount Involved Amount Unpaid
(` million) (` million)
*
Income Tax Act 1961 Income Tax including tax deducted at source and interest as applicable Appellate Authority – up to Commissioner level Assessment years 1994–95 and 2008–09 to 2017–18 777.0 617.9
Income Tax Appellate Tribunal Assessment years 2006–07 and 2012–13 64.0 31.6
The Central Sales Tax Act 1956 and Local Sales Tax Acts Sales tax including interest and penalty as applicable Appellate Authority – up to Commissioner's level 2000–2001 to 2017–2018 671.1 602.0
Tribunal 1993–1994 2001–2002 to 2005–2006 2007–08 2010–2011 to 2012–2013 83.5 52.6
The High Court of Kerala 1997–1998 0.3 0.2
West Bengal Sales Tax Appellate and Revisional Board 2008–2009 to 2010–2011 15.4 15.4
The Finance Act 1994 Service tax Tribunal September 2004 to September 2009 4.8 4.8
The Customs Act 1962 Customs Duty Appellate Authority – up to Commissioner's level 2002–2003 0.4 0.4
The Central Excise Act 1944 Excise duty including penalty as applicable Appellate Authority – up to Commissioner's level 1990 and June 1993 to October 1993 0.6 0.6
Customs Excise & Service Tax Appellate Tribunal August 1993 to December 1996 2.4 2.4

* Net of amount paid under protest.

(viii) The Company has not taken any loans or borrowings from financialinstitutions banks and government or has not issued any debentures. Hence reporting underclause

(viii) of paragraph 3 of the Order is not applicable.

(ix) The Company has not raised any moneys by way of initial publicoffer or further public offer (including debt instruments) or term loans and hencereporting under clause

(ix) of paragraph 3 of the Order is not applicable.

(x) To the best of our knowledge and according to the information andexplanations given to us no fraud by the Company and no material fraud on the Company byits officers or employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanationsgiven to us the Company has paid/provided managerial remuneration in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theAct.

(xii) The Company is not a Nidhi Company and hence reporting underclause (xii) of paragraph 3 of the Order is not applicable.

(xiii) In our opinion and according to the information and explanationsgiven to us the Company is in compliance with sections 177 and 188 of the Act whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the financial statements as required by the applicableaccounting standards.

(xiv) During the year the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures andhence reporting under clause (xiv) of paragraph 3 of the Order is not applicable.

(xv) In our opinion and according to the information and explanationsgiven to us during the year the Company has not entered into any non-cash transactionswith its directors or directors of its holding company or persons connected with them andhence provisions of Section 192 of the Act are not applicable.

(xvi) The Company is not required to be registered under section45–IA of the Reserve Bank of India Act 1934 hence reporting under clause (xvi) ofparagraph 3 of the Order is not applicable.

For Deloitte Haskins & Sells LLP

Chartered Accountants (Firm's Registration No. 117366W/W-100018)

Rakesh N. Sharma Partner (Membership No. 102042)

Place : Mumbai

Date : 23rd May 2019