To the Members of Panacea Biotec Limited
Report on the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of Panacea BiotecLimited ('the Company') which comprise the Balance Sheet as at 31 March 2018 theStatement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofthe significant accounting policies and other explanatory information.
Management's Responsibility for the Standalone Financial
2. 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 of thesestandalone financial statements that give a true and fair view of the state of affairs(financial position) profit or loss (financial performance including other comprehensiveincome) cash flows and changes in equity of the Company in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standards ('IndAS') specified under Section 133 of the Act. This responsibility also includes maintenanceof adequate accounting records in accordance with the provisions of the Act forsafeguarding the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.
3. Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.
4. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.
5. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthese standalone financial statements are free from material misstatement.
6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial controls relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.
7. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on these standalone financial statements.
Basis for Qualified Opinion
8. As explained in Note 53 to the statement the Company's total borrowings as at 31March 2018 includes balances payable to various lenders amounting to Rs. 7315.4 millionwhich are currently recorded based on revised terms agreed with the said lenders as partof Corporate Debt Restructuring ("CDR") scheme and are reconciled with alllenders except in case of one lender as explained in the said Note. Subsequent to the yearend the lenders have informed the Company that they are considering CDR package as failedCDR and exit from CDR consequent to which we are unable to comment upon the impact ifany on the carrying values of borrowings and its related classification as at 31 March2018 and the interest expense (including penal interest if any) for the year then ended.
9. In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter(s) described in the Basis for QualifiedOpinion paragraph the aforesaid standalone financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India including Ind AS specifiedunder Section 133 of the Act of the state of affairs (financial position) of the Companyas at 31 March 2018 and its loss (financial performance including other comprehensiveincome) its cash flows and the changes in equity for the year ended on that date.
Material Uncertainty Related to Going Concern
10. We draw attention to Note 52 to the standalone financial statements which indicatesthat the Company has incurred a net loss (before exceptional items) of Rs. 718.76 millionduring the year ended 31 March 2018 and as of that date the Company's current liabilitiesexceeded its current assets by Rs. 3316.16 million. The Company has defaulted inrepayment of borrowings from banks/ financial institutions and is in the process ofcomplying with the conditions of Corporate Debt Restructuring. These factors along withother matters as set forth in aforesaid note and paragraph 8 above indicate the existenceof a material uncertainty that may cast significant doubt about the Company's ability tocontinue as a going concern. However management has explained that the Company is in theprocess of discussions with potential investors for providing funds to the Company. Basisthis and other factors mentioned in the aforesaid note 52 to the financial statementsmanagement is of the view that going concern basis of accounting is appropriate. Ouropinion is not modified in respect of this matter.
Emphasis of Matters
11. We draw attention to the following notes to the standalone financial statements:
a. Note 56 to the standalone financial statements regarding capital advances amountingto Rs.176.80 million given to a real estate developer for acquiring certain immovableproperties in Dubai where the Company has initiated legal recourse; and
b. Note 51 to the standalone financial statements regarding payment of managerialremuneration for the financial years ended March 312018 2017 2016 2014 and 2013 whichis in excess of the limits specified by the relevant provisions of the Companies Act 2013/ the Companies Act 1956 by Rs. 116.38 million for the said years. The Company'sapplications to the Central Government seeking approval for payment of such excessremuneration have not been approved and consequently the Company is required to recoverthe excess amount thus paid for the said years. The Company has recorded an amount of Rs.116.38 million as recoverable from the directors towards such excess remuneration paid.The Company has submitted new applications to the Central Government for waiver ofrecovery of excess remuneration paid and is also in the process of completing the relatedprocedural formalities.
Pending the ultimate outcome of the aforesaid matters which is presentlyunascertainable no adjustments have been made in the books of accounts. Our opinion isnot qualified in respect of these matters.
12. The Company had prepared separate sets of statutory financial statements for theyear ended 31 March 2017 and 31 March 2016 in accordance with Accounting Standardsprescribed under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014 (as amended) on which we issued auditor's reports to the shareholders of theCompany dated 30 May 2017 and 27 May 2016 respectively. These financial statements havebeen adjusted for the differences in the accounting principles adopted by the Company ontransition to Ind AS which have also been audited by us. Our opinion is not modified inrespect of this matter.
Report on Other Legal and Regulatory Requirements
13. As required by the Companies (Auditor's Report) Order 2016 ('the Order') issued bythe Central Government of India in terms of Section 143(11) of the Act we give in theAnnexure A a statement on the matters specified in paragraphs 3 and 4 of the Order.
14. Further to our comments in Annexure A as required by Section 143(3) of the Act wereport 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 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 standalone financial statements dealt with by this report are in agreement withthe books of account;
d) except for the possible effects of the matter described in the Basis for QualifiedOpinion paragraph in our opinion the aforesaid standalone financial statements complywith Ind AS specified under Section 133 of the Act;
e) the matters described in paragraph 8 and 10 above under the Basis for QualifiedOpinion/Material Uncertainty relating to Going Concern paragraph in our opinion may havean adverse effect on the functioning of the Company;
f) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2018 from being appointed as a director in terms of Section 164(2) of the Act;
g) we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on 31 March 2018 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 30 May 2018 as per Annexure B expressed an unqualified opinion; and
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 as detailed in Note 38 to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. there were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company; and
iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 081203
Annexure To the Auditors' Report
Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:
i) a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b) The Company has a regular program of physical verification of its fixed assets underwhich fixed assets are verified in a phased manner over a period of three years which inour opinion is reasonable having regard to the size of the Company and the nature of itsassets. In accordance with this program certain fixed assets were verified during theyear and no material discrepancies were noticed on such verification.
c) The title deeds of all the immovable properties (which are included under the head'Property plant and equipment') are held in the name of the Company.
ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year except for goods-in-transit and stocks lying withthird parties. For stocks lying with third parties at the year- end written confirmationshave been obtained by the management. No material discrepancies were noticed on theaforesaid verification.
iii) The Company has not granted any loan secured or unsecured to companies firmsLimited Liability
Partnerships (LLPs) or other parties covered in the register maintained under Section189 of the Act. Accordingly the provisions of clauses 3(iii)(a) 3(iii)(b) and 3(iii)(c)of the Order are not applicable.
iv) In our opinion the Company has complied with the provisions of Sections 185 and186 of the Act in respect of loans investments guarantees and security.
v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
vi) We have broadly reviewed the books of account maintained by the Company pursuant tothe Rules made by the Central Government for the maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's products and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.
vii) a) Undisputed statutory dues including provident fund employees' state insuranceincome-tax sales-tax service tax duty of customs duty of excise value added tax cessand other material statutory dues as applicable have generally been regularly depositedto the appropriate authorities though there has been a slight delay in a few cases.Undisputed amounts payable in respect thereof which were outstanding at the year-end fora period of more than six months from the date they became payable are as follows:
Statement of arrears of statutory dues outstanding for more than six months:
|Name of the statute ||Nature of the dues ||Amount (Rs. in million) ||Period to which the amount relates ||Due Date ||Date of Payment ||Remarks if any |
|Income Tax Act 1961 ||Demand u/s 154/250/153A/ 143(3) of Income Tax Act 1961 ||14.5 ||Assessment Year 2011-12 ||April 21 2016 ||Not yet paid ||The Company intends to settle the demand with refund of other years. |
b) The dues outstanding in respect of income-tax sales-tax service-tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:
|Name of the statute ||Nature of dues ||Amount (Rs. in million) ||Amount paid under Protest (Rs. in million) ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Disallowance in respect of certain purchases and expense items ||162.2 ||- ||Assessment Year 2005-06 ||Income Tax Appellate Tribunal (ITAT) |
|Income Tax Act 1961 ||Disallowance in respect of certain purchases and expense items ||3300.7 ||- ||Assessment Year 2006-07 to 2009-10 ||Income Tax Appellate Tribunal (ITAT) |
|The Finance Act 1994 ||Demand raised for service tax by Assessing Officer ||72.6 ||9.8 ||Financial Year 2003-04 to 2011-12 ||Custom Excise & Service Tax Appellate Tribunal |
|Customs Act 1962 ||Duty levied on exempted goods ||4.0 ||4.0 ||Financial Year 2001-02 ||Custom Excise & Service Tax Appellate Tribunal |
viii) There are no loans or borrowings payable to financial institutions or governmentand no dues payable to debenture-holders. The Company has defaulted in repayment ofloans/borrowings to the following banks:
|Name of the bank ||Amount of default as on 31 March 2018 (Rs. in million) ||Period of default |
|Bank of India- Foreign Currency Loan ||543.17 ||Not yet paid |
ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments). In our opinion the term loans were applied for thepurposes for which the loans were obtained.
x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.
xi) The Company has provided and paid managerial remuneration which is not inaccordance with the requisite approval mandated by the provisions of Section 197 of theAct read with Schedule V to the Act.
Further as mentioned in Note 51 to the standalone financial statements the Companyhas paid managerial remuneration which is not in accordance with the requisite thresholdmandated by the provisions of Companies Act 2013/erstwhile 1956 for the relevant yearsended March 312018 2017 2016 2014 and 2013:
The details are as follows:
|S. No ||Payment made to ||Amount Paid/ provided in excess of limits prescribed (Rs. in million) ||Amount due for recovery as at 31 March 2018 (Rs. in million) ||Steps taken to secure the recovery of the amount ||Remarks (if any)# |
|1. ||Managing/Joint Managing and Whole Time Director ||14.3 ||14.3 ||Company has filed applications for waiver of recovery of excess remuneration paid ||Remuneration pertains to year ended March 312013 |
|2. ||Managing/Joint Managing and Whole Time Director ||14.8 ||14.8 ||Company has filed applications for waiver of recovery of excess remuneration paid ||Remuneration pertains to year ended March 31 2014 |
|3. ||Whole Time Director ||2.6 ||2.6 ||Company has filed representation for approval of remuneration ||Remuneration pertains to year ended March 31 2016 |
|4. ||Managing/Joint Managing and Whole Time Director ||43.0 ||43.0 ||Company has filed representation for approval of remuneration ||Remuneration pertains to year ended March 312017 |
|5. ||Managing/Joint Managing and Whole Time Director ||41.6 ||41.6 ||Company has filed representation for approval of remuneration ||Remuneration pertains to year ended March 31 2018 |
# The Company has recorded a receivable amounting to Rs. 116.3 million as recoverablefrom the relevant directors.
xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.
xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable Ind AS.
xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.
xv) In our opinion the Company has not entered into any noncash transactions with thedirectors or persons connected with them covered under Section 192 of the Act.
xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
| ||For Walker Chandiok & Co LLP |
| ||Chartered Accountants |
| ||Firm's Registration No.: 001076N/N500013 |
| ||Rajesh Jain |
|Place : New Delhi ||Partner |
|Date : May 30 2018 ||Membership No.: 081203 |
Annexure To the Auditors' Report
Independent Auditor's Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ('the Act')
1. In conjunction with our audit of the standalone financial statements of PanaceaBiotec Limited ('the Company') as at and for the year ended 31 March 2018 we have auditedthe internal financial controls over financial reporting ('IFCoFR') of the Company as atthat date.
Management's Responsibility for Internal Financial Controls
2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India ("ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of the Company's business including adherenceto the Company's policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.
3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India ('ICAI') and deemed to be prescribed underSection 143(10) of the Act to the extent applicable to an audit of IFCoFR and theGuidance Note issued by the ICAI. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate IFCoFR were established and maintained and if suchcontrols operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining anunderstanding of IFCoFR 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 judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's IFCoFR.
Meaning of Internal Financial Controls over Financial Reporting
6. A company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sIFCoFR include 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
7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that the IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.
8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such controls were operating effectivelyas at 31 March 2018 based on internal control over financial reporting criteriaestablished by the company considering the essential components of internal control statedin the Guidance Note issued by ICAI.
| ||For Walker Chandiok & Co LLP |
| ||Chartered Accountants |
| ||Firm's Registration No.: 001076N/N500013 |
| ||Rajesh Jain |
|Place : New Delhi ||Partner |
|Date : May 30 2018 ||Membership No.: 081203 |