To the Members of Pioneer Distilleries Limited
Report on the audit of the financial statements
1. We have audited the accompanying financial statements of PioneerDistilleries Limited ("the Company") which comprise the balance sheet as atMarch 31 2020 and the statement profitand loss (including other comprehensiveincome) the statement of changes in equity and the statement of cash flows for the yearthen ended and notes to the financialstatements including a summary of significantaccounting policies and other explanatory information.
2. In our opinion and to the best of our information and according tothe explanations given to us the aforesaid 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 of the state of affairs of the Company as at March 31 2020 and totalcomprehensive income (comprising of loss and other comprehensive income) changes inequity and its cash flows for the year then ended.
Basis for opinion
3. We conducted our audit in accordance with the Standards on Auditing(SAs) specified under Section 143(10) of the Act. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the audit ofthe financial 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 together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Act and the Rules thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theCode of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Emphasis of matter
4. We draw your attention to Note 42 to the financial statements whichexplains the uncertainties and the Management's assessment of the financial impactdue conditions related to the COVID-19 pandemic situation for which a definitiveassessment of the impact in the subsequent period is highly dependent upon circumstancesas they evolve. Further our attendance at the physical inventory verification done by theManagement was impracticable under the current lock-down restrictions imposed by theGovernment and we have therefore relied on the related alternative audit procedures toobtain comfort over the existence and condition of inventory at year end. Our opinion isnot modified in respect of this matter.
Key audit matters
5. Key audit matters are those matters that in our professionaljudgment were of most significance in our audit of the financial statements of thecurrent period. These matters were addressed in the context of our audit of the financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.
|Key Audit Matters ||How our audit addressed the key audit matters |
|Assessment of contingent liabilities and provisions for litigations ||Our audit procedures included the following: |
|(Refer Notes 4 and 27 to the financial statements) The Company has litigations related to legal and regulatory matters of which the most significant ones are related to land matters and water charges. ||Understood and evaluated the Company's processes and controls in relation to identifying the risk of not identifying or not disclosing significant litigations and the actions taken by Management to address the risk including the design and operating effectiveness of controls in relation to litigations. |
|(a) The Company has litigations with certain landowners to whom the Company has paid advance amounts for purchase of land in prior years. ||Inquired with the Company's internal legal counsel on the status of litigations and examined underlying notices from Government authorities and terms of settlement with landowners. |
|(b) The Company also has a litigation with a Government authority in connection with charges levied on purchase of water for the Company's processing plant. ||Verified the underlying calculations supporting the appropriateness of related provisions recognised and contingent liabilities disclosed. |
|The amounts involved in litigations are significant and Management applies judgment in estimating the likelihood of the outcome and the amount of liability if any. ||Sought and obtained direct confirmation from external lawyers assisting the Company in dealing with the litigations. |
|We have considered this as a key audit matter as the amounts are significant to the financial the eventual outcome of these matters is uncertain and the position taken by Management is based on the exercise of significant judgement supported by external legal advice where applicable. ||Based on the above work performed Management's assessment in respect of these litigations and related disclosures relating to contingent liabilities wherestatements applicable appears reasonable. |
|Assessment of Going Concern as a basis of accounting : ||Our audit procedures included the following: |
|(Refer Note 40 to the financial statements) The Company has incurred a loss for the year and its accumulated losses as at the year-end exceeds the share capital. Apart from the erosion of net worth the Company's current liabilities as at the year-end exceeds the value of current assets. ||Understood and evaluated the Company's processes and controls in relation to identifying the risk of going concern and the actions taken by Management to address the risk including the design and operating effectiveness of controls in relation to going concern. |
|These indicators cast doubt on the ability of the Company to generate adequate cash from operations to meet its financial obligations over the next twelve months. However the Company has received a letter of financial support from the holding company to support the operations of the Company in the foreseeable future. Management and the Board of Directors have reviewed and approved the cash flow forecast for the next twelve months. Considering the cash flow forecast and the letter of financial support received from the holding company Management and the Board of Directors have concluded that there is no material uncertainty which impacts the ability of the Company to continue as a going concern. ||Verified the letter of financial support received by the Company from the holding company. |
|The availability of sufficient funding and considered in the cash flow forecast are consistent testing whether the Company will be able to continue meeting its obligations are important for the going concern assumption and as such are significant aspects of our audit. The cash flow forecast contains assumptions like revenue growth and improvement in plant operations where Management has applied judgements that in the current external environment can be challenged. Hence this area has been considered as a key audit matter. ||Assessed the financial condition of the holding company to examine whether it would be able to enable the Company to meet its obligations as they fall due for a period of at least one year from the date of the balance sheet. |
| ||Evaluated the inputs and assumptions used in the cash flow forecast prepared by Management by evaluating the assumptions and comparing them to external data as well as estimates used in the preparation of financial statements. |
| ||Verified that the cash flow forecast has been prepared considering the attributes of the prior year approved budget and that the assumptions and comparable with those in the prior year approved budget; and that the estimates and assumptions have been updated where applicable. |
| ||Based on the above work performed Management's assessment of the going concern assumption in the preparation of financial statements appears reasonable. |
6. The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in report of thedirectors but does not include the financial statements and our auditor's reportthereon. Our opinion on the financial statements does not cover the other information andwe do not express any form of assurance conclusion thereon. In connection with our auditof the financial statements our responsibility is to read the other information and indoing so consider whether the other information is materially inconsistent with thefinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated. 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.
Responsibilities of management and those charged with governance forthe financial statements
7. 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 financialperformance changes in equity and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof 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 financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error. 8. In preparingthe financial statements Management is responsible for assessing the Company'sability to continue as a going concern disclosing as applicable matters related togoing concern and using the going concern basis of accounting unless Management eitherintends to liquidate the Company or to cease operations or has no realistic alternativebut to do so. Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.
Auditor's responsibilities for the audit of the financialstatements
9. 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 if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financialstatements. 10. As part of an audit inaccordance with SAs we exercise professional judgment and maintain professionalscepticism 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 control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under Section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls with reference to financial statements inplace and the operating effectiveness of such controls
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by 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 disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
11. 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. 12. 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. 13. From the matterscommunicated with those charged with governance we determine those matters that were ofmost significance in the audit of the financial statements of the current period and aretherefore the key audit matters. We describe these matters in our auditor's reportunless law or regulation precludes public disclosure about the matter or when inextremely rare circumstances we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
14. 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 of the Act we give in the Annexure B a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable. 15. As required bySection 143(3) of the Act we report that: (a) We have sought and obtained all theinformation and explanations which to the best of our knowledge and belief were necessaryfor the purposes of our audit. (b) In our opinion proper books of account as required bylaw have been kept by the Company so far as it appears from our examination of thosebooks.
(c) The balance sheet the statement of profit and loss (includingother comprehensive income) the statement of changes in equity and the cash flowstatement dealt with by this Report are in agreement with the books of account. (d) In ouropinion the aforesaid financial statements comply with the Section 133 of the Act. (e) Onthe basis of the written representations received from the directors as on March 31 2020taken on record by the Board of Directors none of the directors is disqualified as onMarch 31 2020 from being appointed as a director in terms of Section 164(2) of the Act.
(f) With respect to the adequacy of the internal financial controlswith reference to financial statements of the Company and the operating effectiveness ofsuch controls refer to our separate Report in "Annexure A". (g) With respect tothe other matters to be included in the Auditor's Report in accordance with Rule 11of the Companies (Audit and Auditors) Rules 2014 in our opinion and to the best of ourinformation and according to the explanations given to us: i. The Company has disclosedthe impact of pending litigations on its financial position in its financial statementsRefer notes 4 15 and 27 to the financial statements. ii. The Company has long-termcontracts as at March 31 2020 for which there were no material foreseeable losses. TheCompany did not have any derivative contracts. iii. There were no amounts which wererequired to be transferred to the Investor Education and Protection Fund by the Companyduring the year ended March 31 2020. iv. The reporting on disclosures relating toSpecified Bank Notes is not applicable to the Company for the year ended March 31 2020.
16. The Company has paid/provided for managerial remuneration inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith Schedule V to the Act.
Annexure A to Independent auditor's report
Referred to in paragraph 15(f) of the independent auditor's reportof even date to the members of Pioneer Distilleries Limited on the financial statements asof and for the year ended March 31 2020 Page 1 of 2
Report on the internal financial controls with reference to financialstatements under Clause (i) of Subsection 3 of Section 143 of the Act
1. We have audited the internal financial controls with reference tofinancial statements of Pioneer Distilleries Limited ("the Company") as of March31 2020 in conjunction with our audit of the financial statements of the Company for theyear ended on that date.
Management's responsibility for internal financial controls
2. 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 ("the Guidance Note") issued by the Institute of CharteredAccountants of India ("ICAI"). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to Company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under the Act.
3. Our responsibility is to express an opinion on the Company'sinternal financial controls with reference to financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note and the Standards on Auditingdeemed to be prescribed under Section 143(10) of the Act to the extent applicable to anaudit of internal financial controls both applicable to an audit of internal financialcontrols and both issued by the ICAI. Those Standards and the Guidance Note require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls with reference to financialstatements was established operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidenceabout the adequacy of the internal controls system with reference to financial statementsand their operating effectiveness. Our audit financial of internal financial controls withreference to financial statements included obtaining an understanding of internalfinancial controls with reference to financial statements assessing the risk that amaterial weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgement including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error.
5. We believe that the audit evidence we have obtained is sufficientand appropriate to audit opinion on the Company's internal financial controls systemwith reference to financial statements
Meaning of internal financial controls with reference to financialstatements
6. A company's internal financial controls with reference tofinancial statements is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. Acompany's internal financial controls with reference to financial statements includesthose policies and procedures that
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assetsthat could have a material effect on the financial statements.
Inherent limitations of internal financial controls with reference
7. Because of the inherent limitations of internal financial controlswith reference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financialcontrol controls with reference to financial statements maybecome inadequate because of changes in conditions or that the degree of compliance withthe policies or procedures may deteriorate.
8. In our opinion the Company has in all material respects anadequate internal financial controls system with reference to financial statements andsuch internal financial controls with reference to financial statements were operatingeffectively as at March 31 2020 based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note issued by the ICAI. (Also refer paragraph 4 of ourreport on the financial statements)
Annexure B to Independent auditor's report
Referred to in paragraph 14 of the Independent Auditor's Report ofeven date to the members of Pioneer Distilleries Limited on the financial statements as ofand for the year ended March 31 2020 Page 1 of 3
i. (a) The Company is maintaining proper records showing fullparticulars including quantitative details and situation of fixed assets.
(b) The fixed assets are physically verified by the Managementaccording to a phased programme designed to cover all the items over a period of two yearswhich in our opinion is reasonable having regard to the size of the Company and thenature of its assets. Pursuant to the programme a portion of the fixed assets has beenphysically verifiedby the Management during the year and no material discrepancies havebeen noticed on such verification.
(c) The title deeds of immovable properties as disclosed in Note 2 onproperty plant and equipment to the financial statements are held in the name of theCompany.
ii. The physical verification of inventory (excluding stocks with thirdparties) have been conducted at reasonable intervals by the Management during the year. Inrespect of inventory lying with third parties these have substantially been confirmed bythem. The discrepancies noticed on physical verification of inventory by Management ascompared to book records were not material and have been appropriately dealt with in thebooks of account. Further our attendance at the physical inventory verification done bythe Management was impracticable under the current restrictions imposed by the Governmentand we have relied on the related alternative audit procedures. (Also refer paragraph 4of our report on the financial statements).
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 Act. Therefore the provisions of Clause 3(iii)(iii)(a) (iii)(b) and (iii)(c) of the Order are not applicable to the Company.
iv. The Company has not granted any loans or made any investments orprovided any guarantees or security to the parties covered under Sections 185 and 186.Therefore the provisions of Clause 3(iv) of the Order are not applicable to the Company.
v. The Company has not accepted any deposits from the public within themeaning of Sections 73 74 75 and 76 of the Act and the Rules framed there under to theextent notified.
vi. The Central Government of India has not specified the maintenanceof cost records under sub-section (1) of Section 148 of the Act for any of the products ofthe Company.
vii. (a) According to the information and explanations given to us andthe records of the Company examined by us in our opinion the Company is generallyregular in depositing undisputed statutory dues in respect of income tax collected atsource though there has been a slight delay and is regular in depositing undisputedstatutory dues including provident fund employees' state insurance income taxsales tax duty of excise profession tax goods and services tax ("GST") andother material statutory dues as applicable with the appropriate authorities.
Further for the period March 1 to March 31 2020 the Company has paidGST and filed Form GSTR 3B after the due date but within the timelines allowed by theCentral Board of Indirect Taxes and Customs under the Notification Number 31/2020 datedApril 3 2020 on fulfilment of conditions specified therein. Also refer Note 41 to thefinancial statements regarding Management's assessment on certain matters relating toprovident fund.
(b) According to the information and explanations given to us and therecords of the Company examined by us there are no dues of service-tax duty of customsduty of excise or GST which have not been deposited on account of any dispute. Theparticulars of dues of income tax sales tax and value added tax as at March 31 2020which have not been deposited on account of a dispute are as follows:
|Name of the statute ||Nature of dues ||Amount (in Rs.) ||Period to which the amount relates ||Forum where the dispute is pending |
|The Central Sales Tax Act ||Sales tax/ ||84062547 (*) ||2012-13 ||The Joint Commissioner |
|1958 and The Maharashtra Value Added Tax Act 2002 ||Value added tax ||337170316 (**) ||2014-15 ||Appeals Amravati Maharashtra |
|The Income Tax Act 1961 ||Income tax ||7625326 ||2009-10 ||The Commissioner of Income Tax (Appeals) Bengaluru |
(*) Rs.14887357 has been paid "under protest" by theCompany.
(**) Rs. 18138196 has been paid "under protest" by theCompany.
viii. According to the records of the Company examined by us and theinformation and explanation given to us the Company has not defaulted in repayment ofloans or borrowings to any financial institution or bank or Government or dues todebenture holders as may be applicable as at the balance sheet date.
ix. The Company has not raised any moneys by way of initial publicoffer further public offer (including debt instruments). In our opinion and according tothe information and explanations given to us the moneys raised by way of term loan havebeen applied for the purposes for which they were obtained.
x. During the course of our examination of the books and records of theCompany carried out in accordance with the generally accepted auditing practices inIndia and according to the information and explanations given to us we have neither comeacross any instance of material fraud by the Company or on the Company by its officers oremployees noticed or reported during the year nor have we been informed of any such caseby the Management.
xi. The Company has paid/provided for managerial remuneration inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith Schedule V to the Act. (Also refer paragraph 16 of our report on the financialstatements).
xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014are not applicable to it the provisions of Clause 3(xii) of the Order are not applicableto the Company.
xiii. The Company has entered into transactions with related parties incompliance with the provisions of Sections 177 and 188 of the Act. The details of suchrelated party transactions have been disclosed in the financial statements as requiredunder Indian Accounting Standard ("Ind AS") 24 Disclosures specified underSection 133 of the Act.
xiv. The Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year underreview. Accordingly the provisions of Clause 3(xiv) of the Order are not applicable tothe Company.
xv. The Company has not entered into any non-cash transactions with itsdirectors or persons connected with him. Accordingly the provisions of Clause 3(xv) ofthe Order are not applicable to the Company.
xvi. The Company is not required to be registered under Section 45-IAof the Reserve Bank of India Act 1934. Accordingly the provisions of Clause 3(xvi) ofthe Order are not applicable to the Company.
| ||For Price Waterhouse & Co Chartered Accountants LLP |
| ||Firm Registration Number: 304026E/E-300009 |
| ||Chartered Accountants |
| ||Shivakumar Hegde |
| ||Partner |
|Bengaluru ||Membership Number: 204627 |
|May 19 2020 ||UDIN: 20204627AAAABI6013 |