TO THE MEMBERS OF REFNOL RESINS AND CHEMICALS LIMITED
Report on Audit of Standalone Financial Statements Opinion
We have audited the accompanying standalone financial statements of REFNOL RESINSAND CHEMICALS LIMITED ("the Company") having CIN L24200MH1980PLC023507which comprise the Balance Sheet as at March 31 2020 the Statement of Profit and Loss(including Other Comprehensive Income) the Cash Flow Statement and the Statement ofChanges in Equity for the year then ended and notes to the financial statementsincluding a summary of the significant accounting policies and other explanatoryinformation which we have signed under reference to this report (hereinafter referred toas "the standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements 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 Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2020 and its profit (includingother comprehensive income) its cash flows and the changes in equity for the year endedon that date.
Basis of Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under Section 143(10) of the Act and otherapplicable authoritative pronouncements issued by the Institute of Chartered Accountantsof India. Our responsibilities under those Standards are further described in theAuditor's Responsibilities for the Audit of the Standalone Financial Statements section ofour report. We are independent of the Company in accordance with the Code of Ethics issuedby the Institute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. Those Standards and pronouncements require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the standalone financial statements.
Emphasis of Matter
We draw your attention to Note 25.11 to the Standalone Financial Statements whichexplains the management's assessment of the financial impact due to the lock-down andother restrictions and conditions related to COVID-19 pandemic situation for which adefinitive assessment of the impact in the subsequent period is highly dependent uponcircumstances as they evolve. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.
Revenue from the sale of goods has been recognized when the control of the goods istransferred which is generally in accordance with the terms of sales contracts.
We have identified the recognition of revenue as key audit matter because revenue is akey performance indicator of Company and therefor there is an inherent risk that revenueis manipulated to meet financial expectations or targets. The company has variouscustomers with different terms of trade which increase the risk of error in the timing ofrevenue recognition.
How the matter was addressed in our audit;
Our procedures included the following
Obtain understanding of and assessing the design implementation and operatingeffectiveness of management's key internal financial controls in relation to revenuerecognition
Inspecting customer Order / contracts on sample basis to identify the termsand condition relating to the transfer of control of the products sold and assessing theCompany's timing of revenue recognition
Selecting a sample of revenue transactions before and after the financial yearend and assessing the timing of revenue recognition by comparing details of the revenuewith underlying documents which includes goods delivery note gate outward register lorryreceipts shipping documents etc.
Circulation of balance confirmation to customer and reconciling the differencesif any on amounts confirmed by customer and amounts recorded by management.
Information Other than the Financial Statements and Auditors' Report Thereon
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Directors'Report and Management discussion and Analysis included in Company's annual report butdoes not include the financial statements and our auditors' report thereon.
Our opinion on the financial statements does not cover the other information and we donot 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 financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.
Management's Responsibility for the standalone 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 financial statementsto give a true and fair view of the financial position financial performance (includingother comprehensive income) cash flows and changes in equity of the Company in accordancewith the Ind AS and accounting principles generally accepted in India. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation 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 financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone 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.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibilities 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 these 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 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.
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 Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls system in place and the operatingeffectiveness 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 financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in
(i) planning the scope of our audit work and in evaluating the results of our work; and
(ii) to evaluate the effect of any identified misstatements in the 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' ("theorder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Companies Act 2013 and on the basis of such checks of the books andrecords of the Company as we considered appropriate and according to the information andexplanations given to us we give in the "Annexure A" a statement on thematters specified in paragraphs 3 and 4 of the Order.
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 (including other comprehensiveincome) the Cash Flow Statement and the Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account;
(d) In our opinion the aforesaid standalone financial statements comply with theIndian Accounting Standards specified under Section 133 of the Act read with Rule 7 ofthe Companies (Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct.
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".
(g) In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the current yearis in accordance with the provisions of section 197 of the Act.
(h) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our knowledge and belief and according to the information andexplanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its Standalone Ind AS financial statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company during the year ended March 31 2020.
ANNEXURE-A TO THE INDEPENDENT AUDITORS' REPORT
Referred in paragraph 1 under the heading "Report on other legal and regulatoryrequirements" of our report of even date to the members of Refnol Resins andChemicals Limited on the financial statements as of and for the year ended March 31 2020
i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner over a period of three years. Inaccordance with this program certain fixed assets were verified during the year and nomaterial discrepancies were noticed on such verification. In our opinion this periodicityof physical verification is reasonable having regards to the size of the company and thenature of its assets.
(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the records of the company provided to us we reportthat the title deeds comprising all the immovable properties of land and buildings whichare freehold are held in the name of the Company as at the balance sheet date. And withrespect to immovable properties of land that has been taken on lease the lease agreementsare in the name of the Company.
ii. Physical verification of inventory has been conducted by Management at reasonableintervals. In our opinion the frequency of verification is reasonable. On the basis ofour examination of the inventory records in our opinion the Company is maintainingproper records of inventory. The discrepancies noticed on physical verification ofinventory as compared to book records were not material.
iii. The Company has not granted any loans secured or unsecured to any parties coveredin the register mentioned under Section 189 of the Act. Therefore the provisions ofClause 3(iii) (a) (b) & (c) of the said Order are not applicable to the Company.
iv. The company has complied with provisions of section 185 and 186 of the CompaniesAct 2013 in respect of loans investments guarantees and security as applicable.
v. The Company has not accepted any deposits and thus reporting under clause 3(v) ofthe Order is not applicable to the Company.
vi. The company is not required to maintain the cost records under clause 148(1) of theCompanies Act 2013 and thus reporting under clause 3(vi) is not applicable to thecompany.
vii. (a) According to the information and explanations given to us and the records ofthe Company examined by us in our opinion there has been many incidence of delay indepositing undisputed statutory dues in respect of tax deducted at source provident fundand ESIC. Though there have been delay in a few cases the Company is regular indepositing undisputed statutory dues of income tax goods and service tax duty of customprofessional tax and other statutory dues as applicable with the appropriateauthorities.
(b) 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 duty of custom cess and other statutory dues were outstanding at the yearend for a period of more than six months from the date they became payable except Penaltyof late e-filing of TDS which remain unpaid exceeding six months as on 31 March 2020 ofRs. 2.31 Lakhs.
(c) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of income tax sales tax service tax duty ofcustoms duty of excise goods and service tax and value added tax which have not beendeposited on account of any dispute.
viii. In our opinion and according to the information and explanations given to us theCompany has not defaulted in the repayment of loans and borrowings to financialinstitutions or banks.
ix. The Company has not raised money by way of initial public offer or further publicoffer (including debt instruments) and term loans. Accordingly the provisions of Clause3(ix) of the Order are not applicable to the Company.
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 anyfraud by the company or any fraud on the company by its officers or employees has beennoticed or reported during the year nor have we been informed of any such case by theManagement.
xi. Managerial remuneration has been paid and provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the companiesAct.
xii. The company is not a Nidhi Company. Accordingly the provisions of Clause 3(xii)of the Order are not applicable to the Company.
xiii. All transaction with the related parties are in compliance with section 177 and188 of Companies Act 2013 and the details have been disclosed in the Financial Statementsas required by the applicable accounting standards;
xiv. The company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review.
xv. According to the information and explanations given to us and the records of theCompany examined by us the company has not entered into any non-cash transactions withdirectors or any person connected to him.
xvi. The company is not required to be registered under sections 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Order are notapplicable to the Company.
ANNEXURE B TO INDEPENDENT AUDITORS' REPORT
Referred to in Annexure referred to in paragraph 2 (f) under the heading "Reporton other legal and regulatory requirements" of our report of even date to the membersof Refnol Resins and Chemicals Limited on the Ind AS financial statements as of and forthe year ended March 31 2020
Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section143 of the Companies Act 2013
We have audited the internal financial controls over financial reporting of RefnolResins and Chemicals Limited ("the Company") as of March 31 2020 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI). 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 assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing deemed to be prescribedunder section 143(10) of the Companies Act 2013 to the extent applicable to an audit ofinternal financial controls both applicable to an audit of internal financial controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.