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Precot Ltd.

BSE: 521184 Sector: Industrials
NSE: PRECOT ISIN Code: INE283A01014
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Precot Ltd. (PRECOT) - Auditors Report

Company auditors report

To the Members of PRECOT LIMITED (formerly PRECOT MERIDIAN LIMITED)

Report on the Audit of Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of Precot Limited(formerly Precot Meridian Limited) ("the Company") which comprise theStandalone Balance Sheet as at March 31 2021 the Standalone Statement of Profit and Loss(including Other Comprehensive Income) the Standalone Statement of Changes in Equity andthe Standalone Statement of Cash Flows for the year then ended and notes to the standalonefinancial statements including a summary of significant accounting policies and otherexplanatory information (hereinafter referred to as "the standalone financialstatements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards prescribed under section 133 of the Act readwith the Companies (Indian Accounting Standards) Rules 2015 as amended ("IndAS") of the state of affairs of the Company as at March 31 2021 its profitincluding other comprehensive income changes in equity and its cash flows for the yearended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India("ICAI") together with the ethical requirements that are relevant to our auditof the standalone financial statements under the provisions of the Act and Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese 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 on thestandalone financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgement 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 Matter How our audit addressed the Key Audit Matter
Provisions for litigations and disclosure of contingent liabilities: Our audit procedures included the following:
The Company is involved in litigations both for and against the Company comprising of tax matters legal compliances and other disputes. We evaluated and tested the Company's processes and controls for monitoring of litigations disputes compliances and assessment thereof for determining the likely outcome.
The Company assesses the need to make a provision or disclose a contingency on a case-to-case basis considering the underlying facts of each matter in consultation with its legal advisors and lawyers. This involves a high level of management judgement and assumptions which impact the risk assessment and consequential provisioning and disclosure of contingencies in the financial statements. We reviewed the summary of the litigations prepared by the management and discussed the material cases to determine the Company's assessment of the likelihood and magnitude of any liability that may arise.
This area is significant to our audit since the completeness and accuracy of accounting and disclosures for contingencies is dependent on such management judgement and assumptions. We evaluated the legal opinion obtained by the Company and assessed the management's judgements and assumptions on such matters.
We tested the adequacy of disclosures in the financial statements.

 

Key Audit Matter How our audit addressed the Key Audit Matter
Trade receivables and expected credit loss: Our audit procedures included the following:
The trade receivables as at March 31 2021 is ` 10197.56 lakhs and provision for expected credit loss made during the year is ` 248.66 lakhs. Obtained an understanding of and assessed the design implementation and operating effectiveness of key controls relating to collection monitoring process credit control process and estimation of expected credit losses.
The Company measures expected credit loss on trade receivables based on significant management judgement and estimates. Tested the controls relating to classification of the receivable balances included in the receivables ageing report
We have considered assessment of expected credit loss for receivables as a key audit matter because of the significant management judgement involved in its estimation. Reviewed the ageing tested the validity of the receivables discussed with the management as to the disputes if any with the customers understood and evaluated the reason for delay in realisation of the receivables and possibility of realisation of the aged receivable .
Assessed the methodology used by management to estimate the expected credit loss provision and its compliance with the relevant accounting standard.
Assessed the reasonableness of estimate of expected credit loss.

Information other than the Standalone Financial Statements and Auditor's Report thereon

The Company's Management and the Board of Directors are responsible for the preparationof the other information. The other information comprises the information included in theCompany's annual Report but does not include the standalone financial statements and ourauditor's 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 on the other information obtained prior to thedate of this auditor's report we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.

Management's and Board of Directors' Responsibilities for the Standalone FinancialStatements

The Company's Management and the Board of Directors are 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 including other comprehensive income changes in equity and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding Ind AS specified under section 133 of the Act. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements the Management and the Board ofDirectors are 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 management either intends to liquidate theCompany or to cease operations or has no realistic alternative 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 Standalone 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 this standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism 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 control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to standalone financial statements inplace and the operating effectiveness 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 the Management and the Board of Director's use ofthe going 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's report tothe related disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue 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 standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in

(i) planning the scope of our audit work and in evaluating the results of our work; and

(ii) to evaluate the effect of any identified misstatements in the standalone financialstatements.

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 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 and4 of the Order to the extent applicable.

2. (A) As required by Section 143(3) of the Act we report that: a. We have sought andobtained all the information and explanations which to the best of our knowledge andbelief 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 Standalone Balance Sheet the Standalone Statement of Profit and Loss (includingother comprehensive income) the Standalone Statement of changes in Equity and theStandalone Statement of Cash Flows dealt with by this Report are in agreement with thebooks of account;

d. In our opinion the aforesaid standalone financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act read with relevant rulesissued thereunder;

e. On the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on March 312021 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 controls with reference tostandalone financial statements of the Company and the operating effectiveness of suchcontrols we give our separate report in "Annexure 2";

(B) 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 financial statements - Refer Note 41 to the standalonefinancial 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 Refer Note 17 and 22 to the standalone financial statements;

(iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

(C) 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;

For VKS Aiyer& Co.
Chartered Accountants
ICAI Firm Registration No. 000066S
Kaushik Sidartha
Place: Coimbatore Partner
Date: 10 June 2021 Membership No. 217964
UDIN : 21217964AAAACX2939

ANNEXURE 1 TO THE INDEPENDENT AUDITOR'S REPORT

[Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements'in the Independent Auditor's Report of even date to the members of PRECOT LIMITED(formerly PRECOT MERIDIAN LIMITED) on the standalone financial statements for the yearended March 31 2021]

(I) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of the fixed assets.

(b) During the year fixed assets have been physically verified by the management asper the regular programme of verification which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets. As informed no materialdiscrepancies were noticed on such verification.

(c) The title deeds of immovable properties recorded as fixed assets in the books ofaccount of the Company are held in the name of the Company except for the details givenbelow:

Land / Building Total Number of cases Leasehold / freehold Cost / Carrying Value as on st 31 March 2021 ` in Lakhs Remarks
Land 1 Freehold 1422.87 The title deeds are in the name of Meridian Spintex Limited erstwhile Company that was merged with the Company under Section 391 to 394 of the Companies Act 1956 in terms of the approval of the Honourable High Court(s) of judicature vide order dt. 01.09.2006.
Land 1 Freehold 173.10 The title deeds are in the name of Suprem Textiles Processing Limited that was merged with the Company vide NCLT Order Dt. 18.09.2017.
Land 1 Freehold 613.20 The title deeds are in the name of Multiflora (Floriculture) Private Limited currently known as Multiflora Processing Coimbatore Limited that was merged with the Company vide NCLT Order Dt. 18.09.2017.
Land 1 Freehold 51.00 The title deeds are in the name of Meridian Industries Limited erstwhile Company that was merged with the Company under Section 391 to 394 of the Companies Act 1956 in terms of the approval of the Honourable High Court(s) of judicature vide order dt. 01.09.2006.

(ii) The inventory has been physically verified by the management during theyear. In our opinion the frequency of verification is reasonable. As informed nomaterial discrepancies were noticed on physical verification carried out during the year.

(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 paragraph 3 (iii) (a) 3 (iii) (b)and 3 (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 Section 185 and186 of the Act to the extent applicable.

(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 thereunder.

(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 subsection (1) of Section 148 of the Act and the rules framed thereunderand we are of the opinion that prima facie the prescribed accounts and records have beenmade and maintained. However we have not made a detailed examination of the same.

(vii) a) The Company is generally regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund employees state insurance income taxgoods and service tax customs duty cess and any other material statutory dues applicableto it however there have been a slight delay in few cases/delays in deposit which havenot been serious.

AND

According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees state insurance income tax goods andservice tax customs duty cess and other material statutory dues applicable to it wereoutstanding at the year end for a period of more than six months from the date theybecame payable.

b) According to the information and explanation given to us the dues outstanding withrespect to income tax sales tax value added tax service tax duty of customs duty ofexcise goods and services tax on account of any dispute are as follows:

Name of the Statute Nature of dues Amount (` in lakhs) Period to which the amount relates Forum where dispute is pending
Andhra Pradesh Value Added Tax Act 2005 Sales tax and penalties 1.77 1999 - 2000 High Court
Central Excise Act 1944 Excise duty penalties and interest 19.28 2008 - 09 CBIC New Delhi
Central Excise Act 1944 CENVAT credit 39.55 2014 -15 Commissioner of GST and Central Excise (Appeals) Coimbatore
40.06 2014 -15
41.31 2014-15 & 2015 -16
44.24 2015 -16
39.57 2015-16 & 2016-17
Income Tax Act 1961 Income tax 4.43 AY 2013 -14 Order pending with Assessing Officer Coimbatore
Income Tax Act 1961 Income tax 19.74 AY 2014 -15 Order pending with Assessing Officer Coimbatore
Central Goods and Services Tax Act 2017 Transitional Cenvat credit 53.01 April 2017 to June 2017 The Principal Commissioner of GST & Customs (Appeals)

(viii) According to the information and explanations given to us the Company has notdefaulted in repayment of loans or borrowings to financial institution(s) bank(s)government(s) or dues to debenture holder(s).

(ix) In our opinion and according to the information and explanations given to us theCompany has utilized the money raised by way of term loans during the year for thepurposes for which they were raised. The Company did not raise any money by way of Initialpublic offer or 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 paragraph 3(xii) of the Order is not applicableto the Company.

(xiii) According to the information and explanation 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 Standalonefinancial statements 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. Thereforeparagraph 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 explanation given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.

For VKS Aiyer& Co.
Chartered Accountants
ICAI Firm Registration No. 000066S
Kaushik Sidartha
Partner
Place: Coimbatore Membership No. 217964
Date: 10 June 2021 UDIN : 21217964AAAACX2939

ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT

Report on the internal financial controls with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013 ("the Act")

[Referred to in paragraph 2 under 'Report on Other Legal and Regulatory Requirements'in the Independent Auditor's Report of even date to the members of PRECOT LIMITED(formerly PRECOT MERIDIAN LIMITED) on the standalone financial statements for the yearended March 31 2021]

We have audited the internal financial controls with reference to standalone financialstatements of Precot Limited (formerly Precot Meridian Limited) ("theCompany") as of March 31 2021 in conjunction with our audit of the standalonefinancial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to standalone financial statements criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India ("ICAI"). These responsibilities include thedesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Act.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to standalone financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting (the "Guidance Note") issued by the ICAI andthe Standards on Auditing specified under section 143(10) of the Act to the extentapplicable to an audit of internal financial controls with reference to standalonefinancial statements. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to standalone financialstatements were established and maintained and whether such controls operated effectivelyin all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to standalone financial statements andtheir operating effectiveness.

Our audit of internal financial controls with reference to standalone financialstatements included obtaining an understanding of such internal financial controlsassessing 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 judgement including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.

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 withreference to standalone financial statements.

Meaning of Internal Financial Controls with reference

to Standalone Financial Statements

A company's internal financial controls with reference to standalone financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of the financial statements for externalpurposes in accordance with generally accepted accounting principles. A company's internalfinancial controls with reference to standalone financial statements includes thosepolicies 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 standalone financial statements.

Inherent Limitations of Internal Financial Controls with reference to StandaloneFinancial Statements

Because of the inherent limitations of internal financial controls with reference tostandalone 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 standalone financial statements to future periods are subjectto the risk that the internal financial controls with reference to standalone financialstatements may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects adequate internal financialcontrols with reference to standalone financial statements and such internal financialcontrols were operating effectively as at March 31 2021 based on the internal financialcontrols with reference to standalone financial statements criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI.

For VKS Aiyer& Co.
Chartered Accountants
ICAI Firm Registration No. 000066S
Kaushik Sidartha
Partner
Place: Coimbatore Membership No. 217964
Date: 10 June 2021 UDIN : 21217964AAAACX2939

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