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Sagar Systech Ltd.

BSE: 511254 Sector: Financials
NSE: N.A. ISIN Code: INE771Z01015
BSE 05:30 | 01 Jan Sagar Systech Ltd
NSE 05:30 | 01 Jan Sagar Systech Ltd

Sagar Systech Ltd. (SAGARSYSTECH) - Auditors Report

Company auditors report

To

The Members

SAGAR SYSTECH LIMITED

Report on the Audit of the Standalone Financial Statements

We have audited the standalone financial statements of Sagar Systech Limited ("theCompany") which comprise the balance sheet as at 31st March 2019 andthe statement of profit and loss (statement of changes in equity) 24 and statement ofcash flows for the year then ended and notes to the financial statements including asummary of significant accounting policies and other explanatory information.

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 in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at 31st March 2019 and its profit changesin equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for our opinion.

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.

Key Audit Matter Auditors' Response
1 Revenue recognition: Our audit procedures included:
Revenue from supply of services is recognised when control of the services being provided is transferred to the customer and when there are no longer any unfulfilled obligations. The performance obligations in the contracts are fulfilled at the time of performance delivery or upon formal customer acceptance depending on customer terms. Revenue is measured at fair value of the consideration received or receivable after deduction of any trade discounts volume rebates and any taxes or duties collected on behalf of the government such as goods and services tax etc . Accumulated experience is used to estimate the provision for discounts and rebates. Revenue is only recognised to the extent that it is highly probable a significant reversal will not occur. Rebates and discounts are material and have arrangements with varying terms which are based on annual contracts or shorter term arrangements. In addition the value and timing of promotions for products varies from period to period and the activity can span over a year end. • We assessed the appropriateness of the revenue recognition accounting policies including those relating to rebates and discounts by comparing with applicable accounting standards.
• We tested the design implementation and operating effectiveness of management's general IT controls and key application controls over the Company's IT systems which govern revenue recognition including access controls controls over program changes interfaces between different systems and key manual internal controls over revenue recognition to assess the completeness of the revenue entries being recorded in the general ledger accounting system.
• We tested the design implementation and operating effectiveness of controls over the calculation of discounts and rebates.
• We performed substantive testing by selecting samples of revenue transactions recorded during the year by verifying the underlying documents which included goods dispatch notes and shipping documents.
• We inspected on a sample basis key customer contracts to identify terms and conditions relating to service acceptance and rebates and assessing the Company's revenue recognition policies with reference to the requirements of the applicable accounting standards.
• We performed substantive testing by selecting samples of rebate and discount transactions recorded during the year and comparing the parameters used in the calculation of the rebate and discounts with the relevant source documents (including invoices schemes and contracts) to assess whether the methodology adopted in the calculation of the rebates and discounts was in accordance with the terms and conditions defined in the schemes and corresponding customer contract.
• We performed cut-off testing for samples of revenue transactions recorded before and after the financial year end date by comparing with relevant underlying documentation which included goods
dispatch notes and shipping documents to assess whether the revenue was recognized in the correct period.
• We assessed manual journals posted to revenue to identify unusual items.
2 Provisions for taxation litigation and other significant provisions: Our audit procedures included:
Accrual for tax and other contingencies requires the Management to make judgments and estimates in relation to the issues and exposures arising from a range of matters relating to direct tax indirect tax claims general legal proceedings environmental issues and other eventualities arising in the regular course of business. The key judgment lies in the estimation of provisions where they may differ from the future obligations. By nature provision is difficult to estimate and includes many variables. Additionally depending on timing there is a risk that costs could be provided inappropriately that are not yet committed. • We tested the effectiveness of controls around the recognition of provisions.
• We used our subject matter experts to assess the value of material provisions in light of the nature of the exposures applicable regulations and related correspondence with the authorities.
• We challenged the assumptions and critical judgments made by management which impacted their estimate of the provisions required considering judgments previously made by the authorities in the relevant jurisdictions or any relevant opinions given by the Company's advisors and assessing whether there was an indication of management bias.
• We discussed the status in respect of significant provisions with the Company's internal tax and legal team.
• We performed retrospective review of management judgments relating to accounting estimate included in the financial statement of prior year and compared with the outcome.
3 Assessment of contingent liabilities relating to litigations and claims: Our audit procedures included:
The Company is periodically subject to challenges/scrutiny on range of matters relating to direct tax and indirect tax Further potential exposures may also arise from general legal proceedings environmental issues etc. in the normal course of business. Assessment of contingent liabilities disclosure requires Management to make judgments and estimates in relation to the issues and exposures. Whether the liability is inherently uncertain the amounts involved are potentially significant and the application of accounting standards to determine the amount if any to be provided as liability is inherently subjective. • We tested the effectiveness of controls around the recording and re-assessment of contingent liabilities.
• We used our subject matter experts to assess the value of material contingent liabilities in light of the nature of exposures applicable regulations and related correspondence with the authorities.
• We discussed the status and potential exposures in respect of significant litigation and claims with the Group's internal legal team including their views on the likely outcome of each litigation and claim and the magnitude of potential exposure and sighted any relevant opinions given by the Group's advisors.
• We assessed the adequacy of disclosures made.
• We discussed the status in respect of significant provisions with the Group's internal tax and legal team.
• We performed retrospective review of management judgments relating to accounting estimate included in the financial statement of prior year and compared with the outcome.

Other Information

The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the standalone financial statements and our auditor'sreport 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 thisregard.

Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance (changes in equity) 27 and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theaccounting Standards specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe 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 financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

In preparing the financial statements the Board of Directors 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 unlessthe Board of Directors either intends to liquidate the Company or to cease operations orhas no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these 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 section143(3)(i)of the Companies Act 2013 we are also responsible for expressing our opinion onwhether the company has adequate internal financial controls system in place and theoperating effectiveness of such controls.

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

• Materiality is the magnitude of misstatements in the standalone financialstatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.

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

• We also provide those charged with governance with a statement that 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.

• 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 auditors' 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:

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 Companies Act 2013 we give in the Annexure a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.

2. As required by Sectionl43 (3) of the Act we report that:

(a) we have sought and obtained all the information and explanation which to the bestof our knowledge and belief were necessary for the purpose of our audit;

(b) in our opinion proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books;

(c) the Balance Sheet Statement of Profit and Loss including Other ComprehensiveIncome the Cash flow Statement and 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 theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.

(e) On the basis of written representations received from the Directors as on the dateof balance sheet and taken on record by the board of directors we report that none ofthe directors is disqualified as on the said date from being appointed as a director interms of Section 164 (2) of the Act.

(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"; and

(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 does not have any pending litigations which would impact its financialposition;

ii. In our view the Company has made provision as required under the applicable lawor accounting standards for material foreseeable losses if any on long-term contractsincluding derivative contracts;

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

FOR SHAH SHAH & SHAH

CHARTERED ACCOUNTANTS

Mehul Shah

Partner

FRN: 116457W

M. No.: 049361

Place: Mumbai

Date: 30/05/2019

ANNEXURE "A:" REFERRED TO IN REPORT ON OTHER LEGAL AND REGULATORY

REQUIREMENTS OF OUR REPORT OF EVEN DATE

IN CASE OF SAGAR SYSTECH LIMITED

(i) The Company did not have fixed assets in the year under consideration. Hence theclauses as to maintaining proper records showing full particulars of includingquantitative details and situation and verification of fixed assets and title deeds arenot applicable

(ii) Since the Company did not deal in goods and did not have any inventory the clauseas to verification of inventory by the management at reasonable intervals and materialdiscrepancies on physical verification of stocks as compared to the book records is notapplicable.

(iii) The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Companies Act 2013.

(a) Since no loans are granted the sub-clause dealing with terms and conditions beingprejudicial to the Companies Interest in not applicable

(b) Since no loans are granted the sub-clause dealing with receipt of the principalamount and interest on regular basis is not applicable.

(c) Since no loans are granted the sub-clause dealing with overdue amount of more thanninety days is not applicable.

(iv) As per records maintained and explanation given to us the Company has not grantedLoans to directors and other parties listed under section 185 of the Companies Act 2013 orfor that matter given loans and made investments or given guarantees and securities inexcess of limits prescribed by section 186 of the Companies Act 2013.

(v) The Company has not accepted any deposits from public within the meaning of theprovisions of section 73 or any other provisions of the Companies Act 2013 and the rulesmade there under. We have been informed by the management that there has been no orderpassed by the Company law Board or National Company Law Tribunal or Reserve Bank of Indiaor any Court or any other Tribunal on the Company with respect to compliance of theprovisions of section 73 or any other provisions of the Companies Act 2013.

(vi) We have been informed by the management that the Central Government has notprescribed the method of maintenance of cost records under section 148 (1) of theCompanies Act 2013 to the industry to which the Company pertains.

(vii) (a)We have been informed by the management that the Company is generally regularin depositing all undisputed statutory dues with the appropriate authorities and therehave been no material arrears of outstanding dues as at the last day of this financialyear for more than six months from the date they became payable .

(b) In our opinion and according to the information and explanation given to us thereare no dues of Income tax Sales tax Wealth Tax and Service tax Custom Duty ExciseDuty or cess or Value Added Tax as applicable to it which have not been deposited onaccount of any dispute.

(viii) As informed to us by the management the Company has not defaulted in repaymentof any dues to financial institution or banks; whereas there are no debenture holders.

(ix) We have been informed by the management that no money was raised by way of InitialPublic offer or Further Public offer(including Debt instrument) and in case of term Loansthe amount was applied for the purpose for which they are taken.

(x) As informed by the management there has not been noticed or reported any fraud onor by the Company during the year.

(xi) We have been informed by the management that managerial remuneration has been paidor provided in accordance with the requisite approval mandated by the provisions ofsection 197 read with Schedule V to the Companies Act 2013.

(xii) Since the Company is not a Nidhi Company the provisions of this clause are notapplicable to the Company.

(xiii) In our view and as per the explanation given to us by the managementtransactions with the related parties are in compliance with section 177 and 188 of theCompanies Act 2013 wherever applicable and details have been disclosed in the Financialstatements as required by the applicable accounting standard.

(xiv) We have been informed by the management that Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year under review.

(xv) As per the explanation given to us by the management and as per recordsmaintained the Company has not entered into any non-cash transactions with directors orany persons connected with him as prescribed by section 192 of the Companies Act 2013.

(xvi) In our view the Company has carried out activities in nature of activitiescarried out by non banking financial companies and thus is required to get registeredunder section 45-IA of the Reserve Bank of India Act 1934 and is yet to obtain therequired registration.

AS PER OUR REPORT OF EVEN DATE

FOR SHAH SHAH & SHAH

CHARTERED ACCOUNTANTS

Mehul Shah

Partner

FRN: 116457W

M. No.: 049361

Place: Mumbai

Date: 30/05/2019

ANNEXURE "B:" REFERRED TO IN REPORT ON OTHER LEGAL AND REGULATORYREQUIREMENTS OF OUR REPORT OF EVEN DATE IN CASE OF SAGAR SYSTECH LIMITED

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of SagarSystech Limited ("the Company") as of 31st March 2019 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat 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.

Auditors' Responsibility

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 issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated 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 judgment 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 authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized 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 ofthe inherent limitations of internal financial controls over financial reportingincluding the possibility of collusion or improper management override of controlsmaterial misstatements due to error or fraud may occur and not be detected. Alsoprojections of any evaluation of the internal financial controls over financial reportingto future periods are subject to the risk that the internal financial control overfinancial reporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.

Opinion

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 31st March 2019based on the internal control over financial reporting 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.

FOR SHAH SHAH & SHAH

CHARTERED ACCOUNTANTS

Mehul Shah

Partner

FRN: 116457W

M. No.: 049361

Place: Mumbai

Date: 30/05/2019