To the Members of Parag Milk Foods Limited
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS Financial Statements of Parag MilkFoods Limited ("the Company") which comprise the Balance Sheet as at March 312019 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Statement of Cash Flows for the year then ended andnotes to the standalone Ind AS Financial Statements including a summary of significantaccounting policies and other explanatory information (hereinafter referred to as"Ind AS Financial Statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS Financial Statements give the informationrequired by the Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India including the Indian Accounting Standards ("Ind AS") of the state ofaffairs of the Company as at March 31 2019 its profit including other comprehensiveincome changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with Standards on Auditing (SAs) specified underSection 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the standalone Ind ASFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia ("ICAI") together with the ethical requirements that are relevant to ouraudit of the standalone Ind AS Financial Statements under the provisions of the Act andRules thereunder and we have fulfilled our other ethical responsibilities in accordancewith these requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the standalone Ind AS Financial Statements of the currentyear. These matters were addressed in the context of our audit of the standalone Ind ASFinancial Statements as a whole and in forming our opinion thereon and we do not providea separate opinion on this matter. We have determined the matter described below to be thekey audit matters to be communicated in our report.
|Key Audit Matter ||How was the matter addressed in our audit |
|Valuation of Trade Receivables ||Our audit procedures included: |
|(Refer to note 3(iv) 'Accounting policy on trade receivables' note 11 'Trade receivables' and note 36 'Financial Risk Management - Credit Risk' to the standalone Ind AS financial statements) ||(a) Understanding the trade receivables process with regards to valuation and evaluation of controls designed and implemented by the management. |
| ||(b) Assessment of the appropriateness of the Company's credit risk policy and obtaining an understanding on management of credit risk. |
|As at March 31 2019 the trade receivables balance excluding provisions included in note 11 was Rs 2716.74 million. ||(c) Control testing: |
|We have identified valuation of trade receivables as a key audit matter on account of the significant management judgement involved with respect to the recoverability of trade receivables and the provisions for impairment of receivables and the importance of cash collection with reference to the working capital management of the business. || Obtaining an understanding on credit approvals establishing credit limits and continuous monitoring of creditworthiness of customers to which the Company grants the credit in normal course of business. |
| || Obtaining understanding on how the Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables. |
| ||(d) Tests of details: |
| || We have checked the ageing analysis on a sample basis and subsequent receipt of the trade receivables to the source documents including bank statements; |
| || We have verified the underlying supporting documents like acceptance of Invoices along with various correspondence carried out by the Management of the Company with trade receivables for realisation of money; |
| || We have verified open invoices duly accepted by customers in order to ensure existence of trade receivables; |
| || We have verified the appropriateness of judgements regarding provisions for trade receivables and assessment as to whether these provisions were calculated in accordance with the Company's provisioning policies. |
| || We have conducted discussion with Management as to the recoverability of the old outstanding and corroborating Management's explanations with underlying documentation and correspondence with the customers. |
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe standalone Ind AS Financial Statements and our auditor's report thereon.
Our opinion on the standalone Ind AS Financial Statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the Financial Statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the standalone Ind AS Financial Statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management and Those Charged with Governance for the Standalone IndAS Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these standalone Ind AS FinancialStatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including Ind ASspecified 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 of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgements 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 standalone Ind AS Financial Statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind ASFinancial Statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of this standalone Ind AS Financial Statements. As part of an audit inaccordance with SAs we exercise professional judgement and maintain professionalskepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone Ind ASFinancial Statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to Financial Statements in place andthe operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone Ind AS 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 the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone IndAS Financial Statements including the disclosures and whether the standalone Ind ASFinancial Statements represent the underlying transactions and events in a manner thatachieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone Ind AS FinancialStatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
Report on Other Legal and Regulatory Requirements
(1) As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of Section 143(11) of the Act we givein "Annexure 1" a statement on the matters specified in paragraphs 3 and 4 ofthe Order to the extent applicable.
(2) As required by Section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c) The Balance Sheet the Statement of Profit and Loss the Statement of Changes inEquity and the Statement of Cash Flows dealt with by this report are in agreement with thebooks of account;
d) In our opinion the aforesaid standalone Ind AS Financial Statements comply with theIndian Accounting Standards specified under Section 133 of the Act read with relevantrules issued thereunder;
e) On the basis of the written representations received from the directors as on March31 2019 and taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2019 from being appointed as a director in terms of Section164(2) of the Act;
f) With respect to the adequacy of the internal financial controls with reference toFinancial Statements of the Company and the operating effectiveness of such controls wegive our separate report in "Annexure 2".
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of Section 197(16) of the Act as amended;
In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid/provided 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 the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
(i) The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS Financial Statements - Refer Note 41 on ContingentLiabilities;
(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 - Refer Note 18 to the standalone Ind AS Financial Statements;
(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
For Haribhakti & Co. LLP
ICAI Firm Registration No. 103523W / W100048
Membership No. 048539
Date: May 11 2019.
Annexure 1 to the Independent Auditor's Report
[Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements' in the Independent Auditor's Report of even date to the members of ParagMilk Foods Limited ("the Company") on the standalone Ind AS financial statementsfor the year ended March 31 2019]
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Property Plant and Equipment except for certainassets where quantitative details are not available since inception.
(b) During the year the Property Plant and Equipment of the Company have beenphysically verified by the management except for certain assets where quantitativedetails are not available as discussed above and as informed no material discrepancieswere noticed on such verification. In our opinion the frequency of verification isreasonable having regard to the size of the Company and the nature of its assets.
(c) The title deeds of immovable properties recorded as Property Plant and Equipmentin the books of account of the Company are held in the name of the Company.
(ii) The inventory (excluding inventory lying with third parties) has been physicallyverified by the management during the year. In our opinion the frequency of verificationis reasonable. As informed no material discrepancies were noticed on physicalverification carried out during the year. In respect of inventory lying with thirdparties these have substantially been confirmed by them.
(iii) As informed 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 Act. Accordingly clause 3(iii)(a) 3(iii)(b) and3(iii)(c) of the Order are not applicable to the Company.
(iv) Based on information and explanation given to us in respect of loans investmentsguarantees and securities the Company has complied with the provisions of Sections 185and 186 of the Act.
(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public within the provisions of Sections 73to 76 of the Act and the rules framed there under.
(vi) We have broadly reviewed the books of account maintained by the Company in respectof products where the maintenance of cost records has been specified by the CentralGovernment under sub-section (1) of Section 148 of the Act and the rules framed thereunder and we are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained.
(vii) (a) The Company is generally regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund employees' state insurance incometax goods and service tax customs duty cess and any other material statutory duesapplicable to it. However there has been significant delays in depositing dues of goodsand service tax income tax and employees' state insurance.
According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income tax sales taxservice tax value added tax goods and service tax customs duty excise duty cess andany other material statutory dues applicable to it were outstanding at the year end fora period of more than six months from the date they became payable.
(b) According to the information and explanation given to us the dues outstanding withrespect to income tax central sales tax (CST) and value added tax (VAT) on account of anydispute are as follows:
|Name of the Statute ||Nature of the dues ||Amount (Rs in Millions)# ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Tax and Penalty ||12.89 ||2011-12 ||Income Tax Appellate Tribunal |
|Income Tax Act 1961 ||Tax and Penalty ||0.27 ||2014-15 ||Appeal to be filed |
|Income Tax Act 1961 ||Tax and Penalty ||11.96 ||2015-16 ||Appeal to be filed with Commissioner of Income Tax |
|Maharashtra Value Added Tax Act 2002 ||Duty and Penalty ||0.45 ||2006-07 ||Joint Commissioner of Sales Tax (App)-1 |
|Maharashtra Value Added Tax Act 2002 ||Duty and Penalty ||37.90 ||2009-10 ||Joint Commissioner of Sales Tax (App)-1 |
|Maharashtra Value Added Tax Act 2002 ||Duty and Penalty ||0.64 ||2010-11 ||Joint Commissioner of Sales Tax (App)-1 |
|Central Sales Tax Act 1956 ||Duty and Penalty ||8.72 ||2006-07 ||Joint Commissioner of Sales Tax (App)-1 |
|Central Sales Tax Act 1956 ||Duty and Penalty ||20.25 ||2009-10 ||Joint Commissioner of Sales Tax (App)-1 |
# Amount paid under protest against the disputed dues of VAT / CST is Rs 6.66 millions.
(viii) According to the information and explanations given to us the Company has notdefaulted in repayment of loans or borrowings to financial institutions and banks. TheCompany has not taken any borrowing from government or issued any debentures.
(ix) In our opinion and according to the information and explanations given to us theCompany has utilised the money raised by way of term loans during the year for thepurposes for which they were raised. The Company has not raised any money by way of publicissue offer/further public offer (including debt instruments) during the year.
(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of fraud by the Company or any fraud on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such instance by themanagement.
(xi) According to the information and explanations given to us managerial remunerationhas been paid/ provided in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Therefore clause 3(xii) of the Order is not applicable tothe Company.
(xiii) According to the information and explanations given to us all transactionsentered into by the Company with the related parties are in compliance with Sections 177and 188 of Act where applicable and the details have been disclosed in the FinancialStatements etc. as required by the applicable accounting standards.
(xiv) The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review. Thereforeclause 3(xiv) of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with him duringthe year.
(xvi) According to the information and explanations given to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.
For Haribhakti & Co. LLP
ICAI Firm Registration No. 103523W / W100048
Membership No. 048539
Date: May 11 2019.