To the Members of Rupa & Company Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying Standalone Financial Statements of Rupa & CompanyLimited ("the Company") which comprise the Balance Sheet as at March 31 2019the Statement of Profit and Loss (including the Statement of Other Comprehensive Income)the Cash Flow Statement and the Statement of Changes in Equity for the year then endedand notes to the Standalone Financial Statements including a summary of significantaccounting policies and other explanatory information (hereinafter referred to as"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 2019 its profit including othercomprehensive income its Cash Flows and the Changes in Equity for the year ended on thatdate.
Basis for 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. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements' Section of ourreport. We are independent of the Company in accordance with the 'Code of Ethics' issuedby the Institute of Chartered Accountants (ICAI) of India together with the ethicalrequirements that are relevant to our audit of the Standalone Financial Statements underthe provisions of the Act and the Rules there under and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the Standalone Financial Statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Financial Statements for the financial yearended March 31 2019. These matters were addressed in the context of our audit of theStandalone Financial Statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters. For each matter below our description ofhow our audit addressed the matter is provided in that context.
|Description of Key Audit Matter ||How we addressed the matter in our audit |
|1. Assessment of impairment of investment and loans given to subsidiary (Refer to note 6 8 and 9 to the Standalone Financial Statements) ||Our audit procedures performed included the following: |
|As at March 31 2019 the Company has investments amounting to Rs. 991.00 Lakhs and has given loans aggregating to Rs. 4547.17 Lakhs to it's wholly owned subsidiary M/s Oban Fashions Pvt. Ltd. This subsidiary has incurred losses during the current and previous years and as at the year-end it's net-worth is negative which indicates potential impairment of investment along with loans and advances given to this subsidiary. The impairment study requires estimation and judgement around assumptions used including the recoverable value of underlying tangible assets. We consider this a key audit matter given the relative significance of value of investment and loans and advances to the Standalone Financial Statements and extent of management's judgements and estimates involved around impairment assessment of related factors such as future cash flows discount rate terminal value and economic growth rates etc. || We understood the management's process of forecasting the future cash flows evaluating the assumptions and comparing the estimates to externally available industry economic and financial data wherever necessary; |
| || We assessed that the methodology used by management to estimate the recoverable value of the investment is consistent with accounting standards and is in line with the valuation standards applicable in India; |
| || We have involved our internal valuation experts to assess the assumptions and methodologies used by the management to determine the recoverable amount of the investment in subsidiary; |
| || We assessed the Company's sensitivity analysis and evaluated whether any reasonably foreseeable change in assumptions could lead to impairment. |
| || We checked the mathematical accuracy of the impairment model. |
|2. Valuation & existence of inventories (Refer to note 11 to the Standalone Financial Statements) ||Our procedures included the following: |
| || Obtained a detailed understanding and evaluated |
|The Company holds inventories amounting to Rs. 35118.40 Lakhs as at the Balance Sheet date which represent 35.13% of total assets. ||the design and implementation of controls that the company has established in relation to inventory valuation and existence. |
|As described in the accounting policies in note 3.1 to the Standalone Financial Statements inventories are carried at the lower of cost and net realisable value. Inventories valuation and existence is a significant audit risk as inventories may be held for long periods of time before being sold making it vulnerable to obsolescence. As a result the management applies judgment in determining the appropriate provisions for obsolete stock based upon a detailed analysis of old inventory net realisable value below cost based upon future plans for sale of inventory. || Observed the physical verification of inventories count at the financial year end and assessed the adequacy of controls over the existence of inventories. |
| || Obtained assurance over the management's assumptions applied in calculating the gross profit margin and discounts to be deducted from sales price to arrive at cost of products. |
| || Comparing the net realisable value to the cost price of inventories to check for completeness of the associated provision. |
| || Recomputing provisions recorded to verify that they are in line with the Company policy. |
|3. Revenue recognition including estimation of rebates & discounts (Refer Note 26 to the Standalone Financial Statements) ||Our procedures included the following: |
|As described in Accounting Policy for Revenue recognition vide Note 3.6 of the standalone Ind AS Standalone Financial Statements the revenue is recognised upon transfer of control of goods to the customer and thus requires an estimation of the revenue taking into consideration the rebates discounts and incentives as per the terms of the contracts. || Obtained a detailed understanding and evaluated the design and implementation of controls that the company has established in relation to revenue recognition and recording of rebates discountsetc. and period end provisions relating to estimation of revenue and tested the operating effectiveness of such controls; |
| || Tested the inputs used in the estimation of revenue in context of rebates discounts etc. to source data; |
|The Company sells its products through various channels like dealers modern trade distributors retailers etc. and recognize liabilities related to rebates discounts and incentives. || Assessed the underlying assumptions used for determination of rebates discounts etc; |
| || Ensured the completeness of liabilities recognised by evaluating the parameters for sample schemes; |
|With regard to the determination of revenue the management is required to make significant estimates in respect of the rebates/ discounts linked to sales which will be given to the customers pursuant to schemes offered by the Company and compensation (discounts) offered by the customers to the ultimate consumers at the behest of the Company. The matter has been determined to be a key audit matter in view of the involvement of significant estimates by the management. || Performed look-back analysis for past trends by comparing recent actuals with the estimates of earlier periods and assessed subsequent events; |
| || Tested credit notes issued to customers and payments made to them during the year and subsequent to the year- end along with the terms of the related schemes. |
|4. Recoverability of Trade Receivables (Refer Note 12 to the Standalone Financial Statements) ||Our procedures included the following: |
|The Company has trade receivables amounting to Rs. 37022.35 Lakhs as at the Balance Sheet date which represent 37.03% of total assets. || We evaluated and tested the controls relating to credit control and approval process and assessing the recoverability of overdue receivables by comparing management's views of recoverability of overdue receivables to historical patterns of receipts. |
|Due to the inherent subjectivity that is involved in making judgments in relation to credit risk exposures to determine the recoverability of trade receivables and significant estimates and judgements made by the management for provision for loss allowance under Expected credit Loss model. The matter has been determined to be a key audit matter in view of the involvement of significant estimates by the management. || We also checked on sample basis balance confirmations from customers to test whether trade receivables as per books are acknowledged by them. |
| || We also reviewed receipts subsequent to the financial year end for its effect in reducing overdue receivables as the financial year end. |
| || We also reviewed at the adequacy of the management judgements and estimates on the sufficiency of provision for doubtful debts through detailed analyses of ageing of receivables and assessing the adequacy of the disclosures in respect of credit risk. |
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the 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 during the course of our audit or otherwise appears to be materially misstated.If based on the work we have performed we conclude that there is a material misstatementof this other information; we are required to report that fact. We have nothing to reportin 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 Statementsthat 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 accounting principles generally accepted in India including the IndianAccounting Standards (Ind AS) specified under Section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding the assets of the Company and for preventing and detecting fraudsand other irregularities; selection and application of appropriate accounting policies;making judgments and estimates that are reasonable and prudent; and the 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. 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
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 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 system in place and the operating effectiveness ofsuch 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 Standalone Financial Statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the Standalone Financial Statements.
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 sub-section (11) of Section 143 ofthe Act we give in the "Annexure A" a statement on the matters specified inparagraphs 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 the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report 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 read with Companies (IndianAccounting Standards) Rules 2015 as amended from time to time;
(e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 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 statement of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure B".
(g) In our opinion the managerial remuneration for the year ended March 31 2019 hasbeen paid/ provided by the Company to its directors in accordance with the provisions ofSection 197 read with Schedule V to the Act; and
(h) 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 as amended inour opinion and to the best of our information and according to the explanations given tous:
I. The Company has disclosed the impact of pending litigations on its financialposition in its Standalone Financial Statements - Note 10 & 36 to the StandaloneFinancial Statements;
II. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
III. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
Annexure 'A' to the Independent Auditor's Report (Referred to in paragraph 1 under'Report on Other Legal and Regulatory Requirements' section of our report to the Membersof Rupa & Company Limited of even date)
i. In respect of the Company's fixed assets:
a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b. All fixed assets have not been physically verified by the management during the yearbut there is a regular programme of verification which in our opinion is reasonablehaving regard to the size of the Company and the nature of its assets. No materialdiscrepancies were noticed on such verification.
c. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.
ii. The physical verification of inventory excluding inventories in transit have beenconducted at reasonable intervals by the Management during the year. The discrepanciesnoted on physical verification of inventory as compared to book records were not material.Inventories lying with outside parties have been substantially confirmed by them at theyear end.
iii. The Company has granted loan to one body corporate covered in the registermaintained under Section 189 of the Companies Act 2013.
a) In our opinion the rate of interest and other terms and conditions on which theloan has been granted were not prima-facie prejudicial to the interest of the company.
b) In case of the loan granted to the body corporate covered in the register maintainedunder Section 189 of the Companies Act 2013 the loan and interest has been repaid as perthe stipulated terms and conditions.
c) There are no overdue amounts in respect of loan granted to body corporate covered inthe register maintained under Section 189 of the Companies Act 2013.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Act with respectto the loans and investments made.
v. The Company has not accepted deposits from public within the meaning of Section 73to 76 of the Act and the Rules framed there under to the extent notified.
vi. In our opinion and according to the information and explanations given to us theGovernment has not specified maintenance of the cost records under Section 148(1) of theCompanies Act 2013 in regard to the activities of the company.
vii. According to the information and explanations given to us and on the basis of ourexamination of the books of account:
a. The Company is generally regular in depositing undisputed statutory dues includingProvident Fund Employee's State Insurance Income Tax Customs Duty Goods and Servicetax Cess and other statutory dues with the appropriate authorities. According to theinformation and explanations given to us and the records of the Company examined by us noundisputed statutory dues as above were outstanding as at March 31 2019 for a period ofmore than six months from the date they became payable.
b. According to the information and explanation given to us the dues of sales taxincome tax and duty of excise which have not been deposited on account of any dispute andthe forum where the dispute is pending as on March 31 2019 are as under:
|Name of the statute ||Nature of dues ||Amount (Rs. in Lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|The Central Sales Tax Act 1956 ||Demand Relating to non-submission of C Forms & other disputes/disallowances ||44.51 ||Financial Year 2005-06 ||West Bengal Commercial Taxes Appellate Tribunal & Revisional Board |
|The West Bengal Value Added Tax 2003 ||Demand Relating to export & other disallowances / disputes ||35.79 ||Financial Year 2014-15 ||Senior Joint Commissioner Taxes (Appeal) |
viii. According to the records of the Company examined by us and the information andexplanation given to us the Company has not defaulted in repayment of loans or borrowingto any financial institution or bank as at the Balance sheet date. The Company does nothave any outstanding debentures and loans or borrowings from Government as at Balancesheet date.
ix. The Company did not raise any money by way of initial public offer or furtherpublic offer during the year. However the Company has raised funds from Term Loan duringthe year and has applied the same for the purpose for which term loans are raised.
x. According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.
xi. In our opinion and according to the information and explanations given to us theCompany has paid/provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the Act.
xii. The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of theOrder is not applicable to the Company.
xiii. In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the Standalone Financial Statements as required by theapplicable Indian Accounting Standards.
xiv. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly paid convertible debentures and hence reportingunder clause 3 (xiv) of the Order is not applicable to the Company.
xv. In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsDirectors or persons connected to its directors and hence provisions of Section 192 of theCompanies Act 2013 are not 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 arenot applicable to the Company.
Annexure 'B' to the Independent Auditor's Report
(Referred to in paragraph 2 (f) under 'Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Rupa & Company Limited of evendate)
Report on the Internal Financial Controls with reference to Financial Statement underClause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls with reference to Financial Statementof Rupa & Company Limited ("the Company") as of March 31 2019 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 Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control with reference to FinancialStatement criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to respective company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the internal financial controls withreference to Financial Statement 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") issued by the Institute of Chartered Accountants of Indiaand the Standards on Auditing prescribed under Section 143(10) of the Companies Act 2013to the extent applicable to an audit of internal financial controls. 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 with reference to Financial Statement was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to Financial Statement and theiroperating effectiveness. Our audit of internal financial controls with reference toFinancial Statement included obtaining an understanding of internal financial controlswith reference to Financial Statement assessing the risk that a material weakness existsand testing and evaluating the design and operating effectiveness of internal controlbased on the assessed risk. The procedures selected depend on the auditor's judgementincluding the assessment of the risks of material misstatement of the Standalone FinancialStatements 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 systemwith reference to Financial Statement.
Meaning of Internal Financial Controls with reference to Financial Statement
A company's internal financial control with reference to Financial Statement is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Standalone Financial Statements for external purposes inaccordance with generally accepted accounting principles. A company's internal financialcontrol with reference to Financial Statement includes those policies 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) providereasonable assurance that transactions are recorded as necessary to permit preparation ofStandalone 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) providereasonable assurance regarding prevention or timely detection of unauthorised acquisitionuse or disposition of the company's assets that could have a material effect on theStandalone Financial Statements.
Limitations of Internal Financial Controls with reference to Financial Statement
Because of the inherent limitations of internal financial controls with reference toFinancial Statement including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to Financial Statement to future periods are subject to the risk that theinternal financial control with reference to Financial Statement may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem with reference to Standalone Financial Statements and such internal financialcontrols with reference to Standalone Financial Statements were operating effectively asat March 31 2019 based on the internal control with reference to Financial Statementcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India.
| ||For Singhi & Co. |
| ||Chartered Accountants |
| ||Firm's Registration No. 302049E |
| ||Sd/- |
| ||(Aditya Singhi) |
|Place: Kolkata ||Partner |
|Date: May 25 2019 ||Membership No. 305161 |