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Prabhat Dairy Ltd.

BSE: 539351 Sector: Agri and agri inputs
NSE: PRABHAT ISIN Code: INE302M01033
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OPEN 54.00
PREVIOUS CLOSE 53.95
VOLUME 91
52-Week high 92.00
52-Week low 41.00
P/E 128.45
Mkt Cap.(Rs cr) 527
Buy Price 47.00
Buy Qty 100.00
Sell Price 63.25
Sell Qty 147.00
OPEN 54.00
CLOSE 53.95
VOLUME 91
52-Week high 92.00
52-Week low 41.00
P/E 128.45
Mkt Cap.(Rs cr) 527
Buy Price 47.00
Buy Qty 100.00
Sell Price 63.25
Sell Qty 147.00

Prabhat Dairy Ltd. (PRABHAT) - Auditors Report

Company auditors report

To the Members of

Prabhat Dairy Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the standalone financial statements of Prabhat DairyLimited ("the Company") which comprise the balance sheet as at March 31 2019and the statement of Profit and Loss statement of changes in equity and statement of cashflows for the year then ended and notes to the standalone financial statements includinga summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ("the Act') in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2019and profit changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

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 Standalone Financial Statements section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (ICAI) together with the ethical requirements that are relevant toour audit of the standalone financial statements under the provisions of the Act and theRules 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 judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.

Key audit Matters How Was the Key Audit Matter Addressed in the Audit
Assets held for Sale and Discontinued Operations
Refer Note 34 of Financial statement
The Company vide agreement dated January 21 2019 has signed a definitive agreement to sell its dairy business along with its subsidiary Company to Tirumala Milk Products Private Limited for a total consideration of Rs 170000 Lakhs (including adjustment for net debt outstanding working capital adjustment and minimum non-current asset level adjustment as agreed with the buyer). The dairy business constitutes 96.39% of the total revenue of the Company. Our audit procedures in respect of this matter include:
1) Rea ding definitive agreement to sell to understand the terms and conditions of the transaction
2) Eva luating management's assessment of the consideration received for the disposal the carrying amount of the net assets sold and the loss on disposal if any
3) Eva luating applicability of ‘Ind AS 105 -Non-current Assets for Sale and Discontinued Operations' to the said transaction.
We have considered this as a key audit matter because of the significance of the said transaction and disclosure requirements as required under ‘Ind AS 105- Non-current Assets Held for Sale and Discontinued Operations'. 4) Agreeing the cash consideration received to bank statements in the subsequent period.
5) Crit ically assessing the appropriateness of the Company's disclosures in respect of the disposal including the disclosures related to Non-current assets Held for sale and discontinued operations and the restatement of comparative in Statement of profit and loss.
Key audit Matters How Was the Key Audit Matter Addressed in the Audit
Going Concern
Refer Note 44 of Financial statement
The Company has entered into an agreement to sell Our audit procedures in respect of this matter include:
its dairy business along with its subsidiary Company to Tirumala Milk Products Private Limited which constitutes 96.39% of the total revenue of the Company. 1) Rev iewing cash-flow forecasts and challenging management's assumptions around future sales gross margin and operating costs and resulting cash flows;
In view of the above the ability of the Company to continue as a going concern is evaluated. It is supported by the cash flow forecasts prepared by the management. Such forecasts include the managements' assumptions regarding the timing of future cash flows and operating results which are by their nature uncertain. 2) ver ifying the calculation to ensure the accuracy of the underlying financial data;
3) Analysing the impact of reasonable possible changes in cash flow forecasts and their timing by applying sensitivities to key inputs includes future sales gross margin and operating costs;
We have considered this as a key audit matter as the aforesaid transaction could have an impact on the financial position of the Company and involves management's assessment and estimate in evaluating going concern assumption. 4) Ass essing the accuracy of the forecasts by comparing previous forecasts with the Company's actual financial performance; and
5) Ass essing the adequacy of the Company's disclosures within the financial statements.

Information Other than the Standalone Financial Statements andAuditor's Report Thereon

The Company's Board of Directors is responsible for the otherinformation. The other information comprises of the information included in theDirector's report Shareholders information Management Discussion and Analysis andCorporate Governance Report but does not include the standalone financial statements andour auditor's report thereon.

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

In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.

Responsibilities of Management and Those Charged with Governance forthe Standalone Financial Statements

The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these standalonefinancial statements 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 standalone financial statement that give a true andfair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements the Board ofDirectors is responsible for assessing the Company's ability to continue as a goingconcern disclosing as applicable matters related to going concern and using the goingconcern basis of accounting unless the Board of Directors either intends to liquidate theCompany or to cease operations or has no realistic alternative but to do so.

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

Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements

Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.

We give in "Annexure A" a detailed description ofAuditor's responsibilities for Audit of the Standalone Financial Statements.

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 sub-section(11) of section 143 of the Act we give in "Annexure B" a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.

2. As required by Section 143(3) of the Act we report

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

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

(c) The Balance Sheet the Statement of Loss the Statement of Changesin Equity and the Cash Flow Statement dealt with by this Report are in agreement with thebooks of account.

(d) In our opinion the aforesaid standalone statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.

(e) On the basis of the written representations received from thedirectors as on March 31 2019 taken on record by the Board of Directors none of thedirectors are disqualified as on March 31 2019 from being appointed as a director interms of Section 164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controlswith reference to standalone financial statements of the Company and the operatingeffectiveness of such controls refer to our separate Report in "Annexure C".

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

i. The Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements – Refer Note 37 to thestandalone financial statements;

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

iii. There were no amounts which were required to be transferred to theInvestor Education and Protection Fund by the Company.

3. As required by The Companies (Amendment) Act 2017 in our opinionaccording to information explanations given to us the remuneration paid by the Companyto its directors is within the limits laid prescribed under Section 197 of the Act and therules thereunder.

For MSKA & Associates
Chartered Accountants
ICAI Firm Registration No. 105047W
Nitin Manohar Jumani
Place: Shrirampur Partner
Date : May 30 2019 Membership No. 111700

ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT ON EVEN DATE ON THESTANDALONE FINANCIAL STATEMENTS OF PRABHAT DAIRY LIMITED

Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Ide ntify and assess the risks of material of the standalonefinancial 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.

• Ob tain an understanding of internal control the audit in orderto design 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 companyhas internal financial controls with reference to standalone financial statements in placeand the operating effectiveness of such controls.

• Eva luate the appropriateness of accounting used and thereasonableness of accounting estimates and related disclosures made by management.

• Co nclude on the appropriateness of management's of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the standalone financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may cause the Company to cease to continue as a going concern.

• Eva luate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate to with them all relationships and other matters that may reasonably bethought to bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated use in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.

For MSKA & Associates
Chartered Accountants
ICAI Firm Registration No. 105047W
Nitin Manohar Jumani
Place: Shrirampur Partner
Date : May 30 2019 Membership No. 111700

ANNEXURE B TO INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THESTANDALONE FINANCIAL STATEMENTS OF PRABHAT DAIRY LIMITED FOR THE YEAR ENDED MARCH 31 2019

[Referred to in paragraph under ‘Report on Other Legal andRegulatory Requirements' in the Independent Auditors' Report]

i. (a) The company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets (Property Plantand Equipment).

(b) All the fixed assets (Property Plant and Equipment) have not beenphysically verified by the management during the year but there is a regular program ofverification which in our opinion is reasonable having regard to the size of the Companyand the nature of its assets. No material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of immovableproperties are held in the name of the Company.

ii. The inventory (excluding Goods in transit and with third parties)has been physically verified by the management during the year. In respect of inventorylying with third parties these have substantially been confirmed by them. In our opinionthe frequency of verification is reasonable. No material discrepancies were noticed onverification between the physical stocks and the book records.

iii. The Company has granted unsecured loans to Rs 17241.15 lakhs toone of its subsidiary Company covered in the register maintained under section 189 of theCompanies Act 2013. (a) According to the information and explanations given to us andbased on the audit procedures conducted by us we are of the opinion that the terms andconditions of loans granted by the Company to its subsidiary company covered in theregister maintained under section 189 of the Act (total loan amount granted Rs 17241.15lakhs and balance outstanding as at balance sheet date

Rs 527.83 lakhs) are prejudicial to the Company's interest onaccount of the fact that the loans granted are interest free which is significantly lowerthan the cost of funds to the Company and also lower than the prevailing yield ofgovernment securities close to the tenor of the loan.

(b) The loans granted to the Company listed in the register maintainedunder section 189 of the Act are interest free and repayable on demand. According to theinformation and explanations given to us and based on the audit procedures conducted byus we are of the opinion that the Company has not demanded the loan from its subsidiarycompany. (c) The Company has not demanded repayment of its loan. Accordingly there are noamounts overdue for more than ninety days in respect of the loan granted to Company listedin the register maintained under section 189 of the Act. iv. In our opinion and accordingto the information and explanations given to us the Company has not either directly orindirectly granted any loan to any of its directors or to any other person in whom thedirector is interested in accordance with the provisions of section 185 of the Act andthe Company has not made investments through more than two layers of investment companiesin accordance with the provisions of section 186 of the Act. Accordingly stocksprovisions stated in paragraph 3(iv) of the Order are not applicable to the Company. v. Inour opinion and according to the information and explanations given to us the Company hasnot accepted any deposits from the public within the meaning of Sections 73 74 75 and 76of the Act and the rules framed there under. vi. We have broadly reviewed the books ofaccount relating to materials labour and other items of cost maintained by the Companypursuant as specified by the Central Government for the maintenance of cost records undersub-section (1) of section 148 of the Act and we are of the opinion that prima facie theprescribed accounts and records have been made and maintained. We have not however madea detailed examination of the records with a view to determine whether they are accurateor complete. vii. (a) According to the information and explanations given to us and therecords of the Company examined by us in our opinion the Company is generally regular indepositing with appropriate authorities undisputed statutory dues including providentfund employees' state insurance income-tax goods and service tax duty of customscess and any other statutory dues applicable to it.

Statutory dues which were outstanding as at March 31 2019 for aperiod of more than six months from the date they became payable are as follows:

Name of the statute Nature of the dues Amount Rs ( in lakhs) Period to which the amount relates Due Date Date of Payment Remarks if any
Income Tax Act 1961 Advance Tax 49.16 2018-19 September 15 2018 Not paid till May 30 2019

(b) According to the information and explanation given to us andexamination of records of the Company the outstanding dues of income-tax goods andservice tax customs duty cess and any other statutory dues on account of any disputeare as follows

Name of the statute Nature of dues Amount (Rs in lakhs) Period to which the amount relates Forum where dispute is pending
Income tax act 1961 Income tax 35.60 A.Y 2007-08* Income tax Appellate Tribunal Pune
Income tax act 1961 Income tax 28.77 A.Y 2009-10* Income tax Appellate Tribunal Pune
Income tax act 1961 Income tax 113.79 A.Y 2010-11* Income tax Appellate Tribunal Pune
Income tax act 1961 Income tax 16.95 A.Y 2011-12* Income tax Appellate Tribunal Pune
Income tax act 1961 Income tax 257.02 A.Y 2012-13* Income tax Appellate Tribunal Pune

*A.Y. stands for Assessment Year

viii. In our ion opin and according to the information and explanations given to usthe Company has not defaulted in repayment of dues to its banks. The Company did not haveany loan or borrowings from financial institution government or any debenturesoutstanding during the year.

ix. The Company did not raise any money by initial public offer or further public offer(including debt instruments) and term loans during the year. Accordingly the provisionsstated in paragraph 3 (ix) of the Order are not applicable to the Company.

x. Dur ing the course of our audit examination 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 material fraud by the Company or on the Company by its officers or employees.

xi. Acc ording to the information and explanations to us and based on our examinationof the records of the Company the Company has paid/ provided for managerial remunerationin accordance 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 and explanations given to us the Company isnot a Nidhi Company. Accordingly the provisions stated in paragraph 3(xii) of the Orderare not applicable to the Company.

xiii. Acc ording to the information and explanations us and based on our examination ofthe records of the

Company transactions with the related parties are in compliance withsections 177 and 188 of the Act where applicable and details of such transactions havebeen disclosed in the financial statements as required by the applicable accountingstandards. xiv. Acc ording to the information and explanations given way of to us andbased on our examination of the records of the Company the Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year. Accordingly the provisions stated in paragraph 3 (xiv) of theOrder are not applicable to the Company. of the xv. Acc ording to the information andexplanations given to us and based on our examination of the records of the Company theCompany has not entered into non-cash transactions with directors or persons connectedwith him. Accordingly provisions stated in paragraph 3(xv) of the Order are notapplicable to the Company. givenxvi. In our opinion the Company is not required to beregistered under section 45 IA of the Reserve Bank of India Act 1934 and accordingly theprovisions stated in paragraph clause 3 (xvi) of the Order are not applicable to theCompany.

For MSKA & Associates
Chartered Accountants
ICAI Firm Registration No. 105047W
Nitin Manohar Jumani
Place: Shrirampur to Partner
Date : May 30 2019 Membership No. 111700

ANNEXURE C TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THESTANDALONE FINANCIAL STATEMENTS OF PRABHAT DAIRY LIMITED

[Referred to in paragraph (f) under ‘Report on Other Legal andRegulatory Requirements' in the Independent Auditors' Report]

Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls with reference tostandalone financial statements of Prabhat Dairy Limited ("the Company") as ofMarch 31 2019 in conjunction with our audit of the standalone financial statements of theCompany for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's Management is responsible for establishing andmaintaining internal financial controls based on the internal control with reference tostandalone financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (ICAI) (the "Guidance Note"). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to Company's policies the safeguarding of its assetsthe prevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company'sinternal financial controls with reference to standalone financial statements based on ouraudit. We conducted our audit in accordance with the Guidance Note and the Standards onAuditing issued by ICAI and deemed to be prescribed under section 143(10) of the Act tothe extent applicable to an audit of internal financial controls. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether internal financial controls withreference to standalone financial statements was established and maintained and if suchcontrols operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe internal financial controls with reference to standalone financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference tostandalone financial statements included obtaining an understanding of internal financialcontrols with reference to standalone 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 standalone financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls with reference to standalone financial statements.

Meaning of Internal Financial Controls With Reference to StandaloneFinancial Statements

A Company's internal financial control with reference tostandalone financial statements is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of standalonefinancial statements for external purposes in accordance with generally acceptedaccounting principles. A Company's internal financial control with reference tostandalone financial statements includes those policies and procedures that (1) pertain tothe maintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of standalonefinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the company's assets that could have a material effect on thestandalone financial statements.

Inherent Limitations of Internal Financial Controls With Reference toStandalone Financial Statements

Because of the inherent limitations of internal financial controls withreference to standalone financial statements including the possibility of collusion orimproper management override of controls material misstatements due to error or fraud mayoccur and not be detected.

Also projections of any evaluation of the internal financial controlswith reference to standalone financial statements to future periods are subject to therisk that the internal financial control with reference to standalone financial statementsmay become inadequate because of changes in conditions or that the degree of compliancewith the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an internalfinancial controls with reference to standalone financial statements and such internalfinancial controls with reference to standalone financial statements were operatingeffectively as at March 31 2019 based on the internal control with reference tostandalone financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note.

For MSKA & Associates
Chartered Accountants
ICAI Firm Registration No. 105047W
Nitin Manohar Jumani
Place: Shrirampur Partner
Date : May 30 2019 Membership No. 111700