To the members of panama petrochem limited
Report on the audit of the standalone financial statements
We have audited the accompanying standalone financial statements of panama petrochemlimited ("the company") which comprises of the balance sheet as at march31 2020 the statement of profit and loss (including other comprehensive income) thestatement of changes in equity and the statement of cash flows for the year ended on thatdate and a summary of the significant accounting policies and other explanatoryinformation (hereinafter referred to as "the standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements gives a true and fair view inconformity with the aforesaid ind as and other accounting principles generally acceptedin india prescribed under section 133 of the act read with the companies (indianaccounting standards) rules 2015 as amended ("ind as") and other accountingprinciples generally accepted in india of the state of affairs of the company as at march31 2020 the profit (other comprehensive income) changes in equity and its cash flowsfor the year ended on that date.
Basis for opinion
We conducted our audit of the standalone financial statements in accordance with thestandards on auditing ("sa"s) specified under section 143(10) of the act. Ourresponsibilities under those standards are further described in the auditor'sresponsibilities for the audit of the standalone financial statements section of ourreport. We are independent of the company in accordance with the code of ethics issued bythe institute of chartered accountants of india ("icai") together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the act and the rules made thereunder and we have fulfilled ourother ethical responsibilities in accordance with these requirements and the icai's codeof ethics. We believe that the audit evidence obtained by us is sufficient and appropriateto provide a basis for our audit opinion on the standalone financial statements.
Emphasis of matter:
World health organisation (who) declared outbreak of coronavirus disease (covid-19) aglobal pandemic on march 11 2020. Consequent to this government of india declaredlockdown on march 23 2020 and the company temporarily suspended the operations in all itsmanufacturing units in compliance with the lockdown instructions issued by the central andstate governments. Covid-19 has impacted the normal business operations of the company byway of interruption in production product supply unavailability of personnelclosure/lock down of production facilities etc. During the lock-down period. Themanagement believes that no adjustments are required in the financial statements as itdoes not impact the current financial year however in view of the various preventivemeasures taken (such as complete lock-down restrictions by the government of india travelrestrictions etc.) And highly uncertain economic environment a definitive assessment ofthe impact on the subsequent periods is highly dependent upon circumstances as theyevolve.
Our opinion is not modified in respect of above matter.
Key audit matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
Key audit matters
|Sr. No. Key audit matter ||Auditor's response |
|1 Inventory existence: || |
|The company recognized inventory of Rs. 19247.73 lakhs As at 31 march 2020. Inventory held at various locations Across india. ||Due to various restrictions imposed currently as part of measures to combat covid-19 outbreak we have not Attended inventory counts at any locations which we selected based on financial significance and risk. |
|Within each location inventory is stored in warehousesTanks containers and tanks attached to the bonded Custom warehouse. ||For locations selected we performed the following procedures at each site: |
|This is a key audit matter because of the || |
|significance of the inventory balance to the statement of Financial position and ||Observed a sample of managements inventory count Procedures to assess compliance with company policy And |
|complexity involved in determining inventory quantities On hand due to the number conversion from ltr. To kgs.Location and diversity of inventory storage locations Inventories lying with third parties etc. ||we have also evaluated a selection of controls over Inventory existence across the company. Also obtained Confirmation for inventories held with third parties. |
|2 Trade receivables: || |
|Trade receivables comprise a significant portion of the Current assets of the company and serve as security for A majority of the company short-term debt. As indicated In note 6.2 to the standalone financial statements. The Receivables provision has made based on expected Credit loss method. The company considered current And anticipated future economic conditions relating to Industries the company deals with and the countries Where it operates. In calculating expected credit loss the Company has also considered credit reports and other Related credit information for its customers to estimate the Probability of default in future and has taken into account Estimates of possible effect from the pandemic relating to Covid -19. Accordingly the estimation of the allowance For trade receivables is a significant judgments area and is Therefore considered a key audit matter. ||we Assessed the validity of material long outstanding receivables by obtaining third-party confirmations of amounts receivable. We also considered payments received subsequent to year-end insurance held for overseas trade receivables past payment history and unusual patterns to identify potentially impaired balances. the assessment of the appropriateness of the allowance for trade receivables comprised a variety of audit procedures across the company including: |
| ||Of assessing the appropriateness and reasonableness The assumptions applied in the managements' Assessment of the receivables allowance; |
| ||Consideration of the creditworthiness of significant Trade receivables over 90 days; |
| ||Consideration and concurrence of the agreed Payment terms; |
| ||Verification of receipts from trade receivables Subsequent to year-end; |
| ||Inspection of credit insurance policies; and |
| || |
Considered the completeness and accuracy of the Disclosures. To address the risk of management Bias we evaluated the results of audit procedures On other key balances to assess whether or not there Was an indication of bias. We were satisfied that the Company's trade receivables are fairly valued and Adequately provided. We further considered whether The provisions were misstated and concluded That they were appropriate in all material respects And disclosures related to trade receivable in the Standalone financial statements are appropriate.
Information other than the standalone 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 businessresponsibility report corporate governance and shareholder's information but does notinclude the standalone financial statements and our report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information; we are required to report that fact. We havenothing to report in this regard.
Responsibility of management for the standalone financial statements
The company's board of directors is responsible for the matters stated in section134(5) of the companies act2013 ("the act") with respect to the preparation andpresentation of these standalone ind as financial statements that give a true and fairview of the financial position 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 (ind as)specified under section 133 of the act read with relevant rules issued thereunder. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the act for safeguarding 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 standalone ind as 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 board of directors are also responsible for overseeing the company's financialreporting process
Auditor's responsibility for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith sas will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of the standalone financial statements. As part of an audit inaccordance with sas we exercise professional judgment and maintain professionalskepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone 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 in orderto 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 reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
1. As required by section 143(3) of the act based on our audit we report that:
A. We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
B. In our opinion proper books of account as required by law have been kept by thecompany so far as it appears from our examination of those books.
C. The balance sheet the statement of profit and loss (including other comprehensiveincome) statement of
Changes in equity and the statement of cash flow dealt with by this report are inagreement with the relevant books of account.
D. In our opinion the aforesaid standalone financial statements comply with the ind asspecified under section 133 of the act read with rule 7 of the companies (accounts)rules 2014.
E. On the basis of the written representations received from the directors as on march31 2020 taken on record by the
Board of directors none of the directors is disqualified as on march 31 2020 frombeing appointed as a director in terms of section 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 to ourseparate report in "annexure a". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the company's internal financial controls overfinancial reporting.
G. With respect to the other matters to be included in the auditor's report inaccordance with rule 11 of the companies
(audit and auditors) rules 2014 as amended in our opinion and to the best of ourinformation and according to the explanations given to us:
I. The company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements.
Ii. The company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.
Iii. There has been no delay in transferring amounts required to be transferred tothe investor education and protection fund by the company.
2. As required by the companies (auditor's report) order 2016 ("the order")issued by the central government of india in terms of sub-section (11) of section 143 ofthe companies act 2013 we give in the "annexure b" a statement on the mattersspecified in paragraphs 3 and 4 of the order to the extent applicable.
Annexure "a" to the independent auditors' report
(referred to in paragraph 1(f) under report on other legal and regulatoryrequirements' section of our report to the members of panama petrochem limited of evendate)
Report on the internal financial controls under clause
(i) of sub-section 3 of section 143 of the companies act 2013 ("the act")
We have audited the internal financial controls over financial reporting of panamapetrochem limited ("the company") as of 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
The company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the company considering the essential components of internal control statedin the guidance note on audit of internal financial controls over financial reportingissued by the institute of chartered accountants of india (icai'). 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.
Our responsibility is to express an opinion on the company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the guidance note on audit of internal financial controls over financial reporting(the "guidance note") and the standards on auditing issued by icai and deemedto be prescribed under section 143(10) of the act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of internal financial controlsand both issued by the institute of chartered accountants of india. Those standards andthe guidance note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the company's internal financial controls systemover financial reporting.
Meaning of internal financial controls over financial reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) 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 authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised 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
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 and to the best of our information and according to the explanationsgiven to us the company have in all material respects an adequate internal financialcontrols system over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at march 31 2020 based on the internalcontrol over financial reporting criteria established by the respective companiesconsidering the essential components of internal control stated in the guidance note onaudit of internal financial controls over financial reporting issued by the icai.
Annexure "b" to the independent auditors' report
(referred to in paragraph 1 under report on other legal and regulatoryrequirements' section of our report to the members of panama petrochem limited ofeven date.)
I. In respect of property plant and equipment's:
A) the company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment's.
B) as informed to us the property plant and equipment's have been physically verifiedby the management during the period according to a phased programme. In our opinion suchprogramme is reasonable having regard to the size of the company and the nature of itsassets. As informed no material discrepancies were noticed on such verification by themanagement.
C) according to the information and explanations given to us the records examined byus and based on the examination of the conveyance deeds / registered sale deed provided tous we report that the title deeds comprising all the immovable properties of land andbuildings which are freehold are held in the name of the company as at the balance sheetdate. In respect of immovable properties of land and building that have been taken onlease and disclosed as property plant and equipments in the standalone financialstatements the lease agreements are in the name of the company
Ii. In respect of its inventories:
As informed to us the physical verification of the inventories was done by themanagement at reasonable intervals at the end of each month and for year-end they haveconducted physical verification at a date other than the date of financial statements dueto a government lockdown and we have received confirmation with respect to inventorieslying with third parties. In our opinion the frequency of verification is reasonable.Further on the basis of our examination of the records the company is generallymaintaining proper records of its inventories. No material discrepancy was noticed onphysical verification of stocks by the management as compared to book records.
Iii. The company has not granted loans secured or unsecured to companies firmslimited liability partnerships or other parties covered in the register maintained undersection 189 of the act and accordingly the provisions of clause (iii) (a) to (c) of para3 of the order are not applicable to the company.
Iv. The company has not granted any loan under section 185 of the act. The companyhas complied with the provisions of section 186 of the act with respect to the investmentand guarantees. The company has neither given any security nor given any loans during theyear.
V. According to the information and explanations given to us the company has notaccepted any deposits from the public as per the provisions of section 73 to 76 of the actand rules framed thereunder and accordingly the provisions of clause (v) of para 3 ofthe order are not applicable to the company.
Vi. We have broadly reviewed accounts and records maintained by the companypursuant to the rules made by the central
Government for the maintenance of cost records under section (1) of section 148 of theact related to manufacture of specialty petroleum products and are of the opinion thatprima facie the prescribed accounts and records have been made and maintained. We havehowever not made a detailed examination of records with a view to determine whether theyare accurate.
Vii. In respect of statutory dues:
A) according to the information and explanations given to us and according to therecords of the company examined by us in our opinion the company is generally regular indepositing with the appropriate authorities undisputed statutory dues including providentfund employees' state insurance income-tax goods and service tax cess or/ and anyother material statutory dues wherever applicable.
According to the information and explanations given to us there were no outstandingstatutory dues as on 31 march 2020 for a period of more than six months from the date theybecame payable.
B) according to the information and explanation given to us there are no duesoutstanding in respect of income-tax vat excise duty service tax custom duty goodsand service tax cess or/and any other material statutory dues wherever applicable whichhave not been deposited on account of any dispute except the following;
|Name of the statute ||Nature of the dues ||Amount (inr in lakhs) ||Period to Which The Amount Relates ||Forum where dispute is Pending |
|Custom act 1962 ||Custom duty fine And penalty ||126.70 ||Fy 2011-12 ||High court mumbai |
|Central excise act 1944 ||Central excise duty ||40.47 ||Fy 2016-17 ||The commissioner appeals Cgst & central excise Commissioner ate surat. |
|Central excise act 1944 ||Central excise duty ||27.97 ||Fy 2017-18 ||The commissioner appeals Cgst & central excise Commissioner ate surat. |
Viii. In our opinion and according to the information and explanations given to usthe company has not defaulted in the repayment of dues to banks. The company did not haveany borrowings from financial institutions government or dues to debenture holders.
Ix. Based on our audit procedures and on the basis of information and explanationsgiven to us the company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) during the year. According to the informationand explanations given to us the term loans raised have been applied by the companyduring the year for the purposes for which they were raised.
X. Based upon the audit procedures performed and the information and explanationsgiven by the management no fraud by the company and no fraud on the company by itsofficers or employees has been noticed or reported during the year.
Xi. Based upon the audit procedures performed and the information and explanationsgiven by the management the managerial remuneration has been paid / provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith schedule v to the act.
Xii. In our opinion and according to the information and explanations given to usthe company is not a nidhi company.
Accordingly the provisions of clause (xii) of para 3 of the order are not applicableto the company.
Xiii. According to the information and explanations given to us and based on ourexamination of the records of the company transactions with the related parties are incompliance with sections 177 and 188 of the act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
Xiv. According to the information and explanations give to us and based on ourexamination of the records of the company the company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
Xv. According to the information and explanations given to us and based on ourexamination of the records of the company the company has not entered into non-cashtransactions with directors or persons connected with the directors requiring compliancewith section 192 of the companies act.
Xvi. The company is not required to be registered under section 45-ia of thereserve bank of india act 1934. Accordingly clause 3 (xvi) of the order is notapplicable to the company.