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RHI Magnestia India Ltd.

BSE: 534076 Sector: Engineering
NSE: RHIM ISIN Code: INE743M01012
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OPEN 325.40
PREVIOUS CLOSE 322.95
VOLUME 19437
52-Week high 356.80
52-Week low 163.50
P/E 39.18
Mkt Cap.(Rs cr) 5,324
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 325.40
CLOSE 322.95
VOLUME 19437
52-Week high 356.80
52-Week low 163.50
P/E 39.18
Mkt Cap.(Rs cr) 5,324
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

RHI Magnestia India Ltd. (RHIM) - Auditors Report

Company auditors report

INDEPENDENT AUDITOR'S REPORT

TO THE MEMBERS OF ORIENT REFRACTORIES LIMITED

Report on the Audit of the Standalone financial Statements

Opinion

1. We have audited the accompanying standalone financial statements of OrientRefractories Limited (“the Company”) which comprise the balance sheet as atMarch 31 2020 and the statement of Profit and Loss (including Other ComprehensiveIncome) statement of changes in equity and statement of cash flows for the year thenended and notes to the standalone financial statements including a summary ofsignificant accounting policies and other explanatory information.

2. 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 India ofthe state of affairs of the Company as at March 312020 and total comprehensive income(comprising of profit and other comprehensive income) changes in equity and its cashflows for the year then ended.

Basis for opinion

3. 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 together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.

Emphasis of matter

4. We draw your attention to Note 37 to the standalone financial statements whichdescribes the management's assessment of the impact of the outbreak of Coronavirus(Covid-19) on the business operations of the Company. The management believes that noadjustments are required in the standalone financial statements as it does not impact thecurrent financial year however in view of the various preventive measures taken (such ascomplete lock-down restrictions by the Government of India travel restrictions etc.) andhighly uncertain economic environment a definitive assessment of the impact on thesubsequent periods is highly dependent upon circumstances as they evolve. Our opinion isnot modified in respect of this matter.

Key audit matters

5. Key audit matters are those matters that in our professional judgment 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.

Key audit matters

i. Determination of cost of Work-in-Progress and Finished Goods for valuation ofinventory

Refer to Note 8 (Inventories) and Note 2.14 (Significant accounting policies onInventories) to the standalone financial statements.

The carrying amount of inventory of work in progress is Rs. 1310.70 lacs and offinished goods is Rs. 3836.12 lacs as at March 31 2020.

The Company carries its inventory for work-in-progress and finished goods at the lowerof cost and net realizable value. The cost is determined using weighted average costformula.

The Company's process for arriving at the cost of inventory of work in progress andfinished goods involves manual determination of the composition of raw material includedin the inventory based on physical count of the inventory and its reconciliation with theraw material issued for the related batch under production/ produced and allocation of anappropriate proportion of production overheads.

We considered this as a key audit matter because of the significance of the inventorybalance to the standalone financial statements and the Company's processes involvingmanual calculations around determination of composition which carry an inherent risk oferrors and accordingly may impact the carrying values of inventory.

How our audit addressed the key audit matter

We carried out the following procedures:

• Obtained understanding on the process and controls over the inventory costingand inventory cycle and evaluated and tested such controls.

• Verified the composition of raw material included in the inventory ofwork-in-progress and finished goods from the approved Bills of Material (BOM).

• Consequent to the lockdown restrictions at year end we observed the physicalverification of inventory of work in progress and finished goods conducted by themanagement in the Bhiwadi factory on a test check basis and verified the roll backprocedures performed by the management to obtain the sufficient appropriate audit evidenceabout the existence of inventory at the balance sheet date.

• For the inventory of finished goods at Total Refractory Management (TRM) siteswe observed the physical verification conducted by management on a test check basisprior to year-end and verified the roll forward procedures performed by the management toobtain the sufficient appropriate audit evidence about the existence of inventory at thebalance sheet date.

• Verified the stores records and other underlying documentation for verificationof issuance of raw material to the batches of production.

• Verified that the overheads allocated comprise of the costs that are incurred inrelation to the production process.

• Verified the arithmetical accuracy of calculation of cost of inventory includingallocation of production overheads.

Based on the above audit procedures we considered the management's determination ofcost of work-in-progress and finished goods for valuation of inventory to be reasonable.

ii. Allowance for doubtful trade receivables

Refer to Note 5(b) Trade Receivables and Note 2.7(D) (Significant accounting policieson Impairment of financial assets) to the standalone financial statements.

Trade Receivables as at March 31 2020 amount to Rs. 14624.58 lacs (net of allowancefor doubtful debts of Rs. 220.38 lacs).

The Company determines the allowance for doubtful debts based on historical lossexperience adjusted to reflect current and estimated future economic conditions relatingto industries the Company deals with and has receivables from.

In calculating the allowance for doubtful trade receivables the Company has alsoconsidered subsequent collections and other information for its customers to estimate theprobability of default in future and has taken into account estimates of possible effectfrom the Covid-19.

We identified allowance for doubtful debts as a key audit matter because of thesignificance of Trade Receivables balance to the standalone financial statements andconsidering that the Management exercises significant judgment in estimating the allowancefor doubtful debts.

How our audit addressed the key audit matter

Our audit procedures related to the allowance for doubtful debts for trade receivablesincluded the following:

• Obtained understanding of the process and controls over the determination ofadequacy of allowance for doubtful debts.

• Tested the design implementation and operating effectiveness of relevantinternal controls relating to collection of trade receivables and the calculation of theallowance for trade receivables.

• Evaluated reasonableness of the method and assumptions and judgements used bythe Management with respect to recoverability of trade receivables.

• Assessed the profile of trade receivables and the economic environmentapplicable to these debtors.

• For a sample of customers:

• We obtained and tested the details of collections subsequent to the year-endfrom the debtors outstanding as at March 312020.

• We tested other information used in estimating the probability of default bycomparing them to external and internal sources of information.

• We tested the mathematical accuracy and computation of the allowances by theCompany.

• Evaluated the appropriateness of the presentation and disclosures made in thefinancial statements.

Other Information

6. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the annual report but does not includethe standalone financial statements and our auditor'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 in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact.

We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the standalonefinancial statements

7. 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 statementsthat give a true and fair view of the financial position financial performance changesin equity and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the Accounting Standards specified under section133 of the Act This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.

8. 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. Those Board of Directors are also responsible foroverseeing the Company's financial reporting process.

Auditor's responsibilities for the audit of the standalone financial statements

9. 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.

10. As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism 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 Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone 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.

11. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

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 matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the standalone financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on other legal and regulatory requirements

14. 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 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 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 Statement of Changes in Equity and Statement of Cash Flows dealt with by thisReport are in agreement with the books of account.

(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act.

(e) On the basis of the written representations received from the directors as on March312020 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 with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in “Annexure A”.

(g) 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 27 to the standalonefinancial statements;

ii. The Company has long-term contracts as at March 31 2020 for which there were nomaterial foreseeable losses. The Company did not have any long-term derivative contractsas at March 312020.

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

iv. The reporting on disclosures relating to Specified Bank Notes is not applicable tothe Company for the year ended March 31 2020.

16. The Company has paid/ provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct.

For Price Waterhouse Chartered Accountants LLP
Firm Registration Number: 012754N/N500016
Abhishek Rara
Partner
Place: Gurugram Membership Number: 077779
Date: June 29 2020 UDIN: 20077779AAAAAV2155

ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT

Referred to in paragraph 15(f) of the Independent Auditors' Report of even date to themembers of Orient Refractories Limited

on the standalone financial statements for the year ended March 31 2020

Report on the Internal Financial Controls with reference to financial statements underClause (i) of Sub-section 3 of

Section 143 of the Act

1. We have audited the internal financial controls with reference to financialstatements of Orient Refractories Limited (“the Company”) as of March 31 2020in conjunction with our audit of the standalone financial statements of the Company forthe year ended on that date.

Management's Responsibility for Internal Financial Controls

2. 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 Act.

Auditors' Responsibility

3. Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the “Guidance Note”) and the Standards on Auditing deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of internal financial controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls with reference to financial statementswas established and maintained and if such controls operated effectively in all materialrespects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.

5. 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 systemwith reference to financial statements.

Meaning of Internal Financial Controls with reference to financial statements

6. A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.

Inherent Limitations of Internal Financial Controls with reference to financialstatements

7. Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may

occur and not be detected. Also projections of any evaluation of the internalfinancial controls with reference to financial statements to future periods are subject tothe risk that the internal financial control controls with reference to financialstatements may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.

Opinion

8. In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as atMarch 31 2020 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.

For Price Waterhouse Chartered Accountants LLP

Firm Registration Number: 012754N/N500016

Abhishek Rara
Partner
Place: Gurugram Membership Number: 077779
Date: June 29 2020 UDIN: 20077779AAAAAV2155

ANNEXURE B TO THE INDEPENDENT AUDITORS' REPORT

Referred to in paragraph 14 of the Independent Auditors' Report of even date to themembers of Orient Refractories Limited on the standalone financial statements as of andfor the year ended March 31 2020 .

i. (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of

fixed assets.

(b) The fixed assets are physically verified by the Management according to a phasedprogramme designed to cover all the items over a period of two years which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. Pursuant to the programme a portion of the fixed assets has been physicallyverified by the Management during the year and no material discrepancies have been noticedon such verification.

(c) The title deeds of immovable properties as disclosed in Note 3 on fixed assets tothe standalone financial statements are held in the name of the Company.

ii. The physical verification of inventory including stocks with third parties havebeen conducted at reasonable intervals by the Management during the year. Furtherphysical verification of inventory has been carried out by the management subsequent toyear end due to lockdown restrictions imposed by the Government of India consequent to theoutbreak of coronavirus (Covid-19) for which roll back procedures have been performed todetermine the existence as at year end. The discrepancies noticed on physical verificationof inventory as compared to book records were not material.

iii. The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other

parties covered in the register maintained under Section 189 of the Act. Therefore theprovisions of Clause 3(iii) (iii)(a)

(iii)(b) and (iii)(c) of the said Order are not applicable to the Company.

iv. The Company has not granted any loans or made any investments or provided anyguarantees or security to the parties covered under Section 185 and 186. Therefore theprovisions of Clause 3(iv) of the said Order are not applicable to the Company.

v. The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the Rules framed there under to the extentnotified.

vi. Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under Section 148(1) of the Act in respectof its products.

We have broadly reviewed the same and 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 the records ofthe Company examined by us in our

opinion the Company is regular in depositing the undisputed statutory dues includingprovident fund employees' state insurance income tax sales tax service tax duty ofcustoms goods and services tax and other material statutory dues as applicable with theappropriate authorities.

For the month of March 2020 the Company has paid goods and services tax and filedGSTR1 and GSTR 3B after the due date but within the timelines allowed by Ministry ofFinance under the Notification No. 35/2020-GST dated April 03 2020 on fulfilment ofconditions specified therein.

Also in view of the extension of time granted vide No.C-1/Misc./2019-20/Vol.II/Part./9dated April 15 2020 for the payment of Provident fund within May 15 2020 the Company hasdeposited the dues within the extended due date as notified by the relevant regulatoryauthorities.

(b) 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 goods and servicestax value added tax which have not been deposited on account of any dispute. Theparticulars of dues of service tax duty of customs and duty of excise as at March 312020 which have not been deposited on account of a dispute are as follows:

Name of the statute Nature of dues Amount Amount paid under protest

Period to which the amount relates

Forum where the dispute is pending

(Rs. in lacs)

Finance Act 1994 Service Tax 123.61 3.09 January 2013 to February 2015 Customs Excise and Service Tax Appellate Tribunal
Customs Act 1962 Customs Duty 0.86 April 2016 to June 2017 Commissioner of Customs (Appeals)
Central Excise Act 1944 Excise Duty 31.42 1.11 April 2016 to March 2017 Commissioner (Appeals)
Central Excise Act 1944 Excise Duty 46.65 1.65 April 2016 to March 2017 Commissioner (Appeals)

viii. As the Company does not have any loans or borrowings from any financialinstitution or bank or Government nor has it issued any debentures as at the balancesheet date the provisions of Clause 3(viii) of the Order are not applicable to theCompany.

ix. The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments) and term loans. Accordingly the provisions ofClause 3(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 anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.

xi. The Company has paid/ provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct.

xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provisions of Clause 3(xii) of the Order are not applicable to the Company.

xiii. The Company has entered into transactions with related parties in compliance withthe provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the standalone financialstatements as required underIndian Accounting Standard (Ind AS) 24 Related Party Disclosures specified under Section133 of the Act.

xiv. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of Clause 3(xiv) of the Order are not applicable to the Company.

xv. The Company has not entered into any non-cash transactions with its directors orpersons connected with him. Accordingly the provisions of Clause 3(xv) of the Order arenot applicable to the Company.

xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Order are notapplicable to the Company.

For Price Waterhouse Chartered Accountants LLP

Firm Registration Number: 012754N/N500016

Abhishek Rara
Partner
Place: Gurugram Membership Number: 077779
Date: June 29 2020 UDIN: 20077779AAAAAV2155

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