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Sambandam Spinning Mills Ltd.

BSE: 521240 Sector: Industrials
NSE: SAMBANDAM ISIN Code: INE304D01012
BSE 12:44 | 19 Feb 64.00 2.15
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NSE 05:30 | 01 Jan Sambandam Spinning Mills Ltd
OPEN 64.00
PREVIOUS CLOSE 61.85
VOLUME 100
52-Week high 104.90
52-Week low 52.95
P/E 7.64
Mkt Cap.(Rs cr) 27
Buy Price 64.00
Buy Qty 50.00
Sell Price 61.85
Sell Qty 30.00
OPEN 64.00
CLOSE 61.85
VOLUME 100
52-Week high 104.90
52-Week low 52.95
P/E 7.64
Mkt Cap.(Rs cr) 27
Buy Price 64.00
Buy Qty 50.00
Sell Price 61.85
Sell Qty 30.00

Sambandam Spinning Mills Ltd. (SAMBANDAM) - Auditors Report

Company auditors report

independent auditors' report to the members of sambandam spinning mills limited

Report on the audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalone Ind AS Financial Statements of SAMBANDAMSPINNING MILLS LIMITED ("the Company") which comprise the Balance Sheet asat March 312019 the Statement of Profit and Loss including Other Comprehensive Incomethe Cash Flow Statement and the Statement of Changes in Equity for the year then endedand notes to the standalone Ind AS financial statements including a summary ofsignificant 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 Ind AS Financial Statements give the informationrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 312019its profit including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards 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 Ind AS Financial Statements' section ofour report. We are independent of the Company in accordance with the 'Code of Ethics'issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS 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 Ind AS financial statements for the financialyear ended March 31 2019. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. We have determined the mattersdescribed below to be the key audit matters to be communicated in our report. We havefulfilled the responsibilities described in the Auditor's responsibilities for the auditof the standalone Ind AS financial statements section out of report including in relationto these matters. Accordingly our audit included the performance of procedures designedto respond to our assessment of the risks of material misstatement of the standalone IndAS financial statements. The results of our audit procedures including the proceduresperformed to address the matters below provide the basis for our opinion on theaccompanying standalone Ind AS financial statements.

a. revenue recognition

Key Audit Matter Description

Reference may be made to note 3 of significant accounting policies and note 23 to thefinancial statements of the Company.

During the year on account of adoption of new revenue standard Ind AS 115 - Revenuefrom contracts with customer there have been changes in revenue recognition policy withregards to timing of recognition and related disclosures.

Revenue recognition is inherently an area of audit risk which we have substantiallyfocused on mainly covering the aspects of cut off considering the above impact of Ind AS115 and cut-off are key audit matters.

Response to Key Audit Matter Principal Audit Procedures

Our audit procedures relating to revenue comprised of test of controls and substantiveprocedures including the following:

a. We assessed whether the policy of recognizing revenue was in line with Ind AS - 115.

b. We performed procedures to assess the design and internal controls established bythe management and tested the operating effectiveness of relevant controls related to therecognition of revenue.

c. Selected a sample of continuing and new contracts and tested the operatingeffectiveness of the internal control relating to identification of the distinctperformance obligations and determination of transaction price. We carried out acombination of procedures involving enquiry and observation reperformance and inspectionof evidence in respect of operation of these controls.

d. We have tested on a sample basis whether specific revenue transactions around thereporting date has been recognised in the appropriate period by comparing the transactionsselected with relevant underlying documentation including goods delivery notes customeracknowledgement/proof of acceptance and the terms of sales.

e. We have also validated subsequent credit notes and sales returnsup to the date ofthis Report to ensure the appropriateness and accuracy of the revenue recognition.

f. We tested journal entries on a sample basis to identify any unusual or irregularitems.

g. We also considered the adequacy of the disclosures in Company's financial statementsin relation to Ind AS 115 and were satisfied they meet the disclosure requirements.

Conclusion

Based on the procedures performed above we did not find any material exceptions withregards to adoption of Ind AS 115 and timing of revenue recognition.

b. valuation of inventory

Key Audit Matter Description

Considering the risks involved such as identification of stages of work in progressvaluation of inventory is considered to be key audit matter.

Response to Key Audit Matter

Principal Audit Procedures

We have planned and performed the following audit procedures with respect to the Keyaudit matter identified.

a. Verified the stock issue register to identify the stage of completion

b. Validated the management internal control process for valuation of inventory.

c. Recheck of valuation principles adopted for inventory.

d. Discussed with the management on the management's process of identifying the stagesof completion and valuing work in progress stock at the time of book closure process.

Conclusion

Based on the above procedures and physical verification of stock with identified stagesof processes by the Management at the year end we concluded that the valuation ofInventory at the year end is fair and in terms of accounting principles. We have alsoconcluded that other alternate manual controls established ensure that there is nomaterial misstatement in the standalone Ind AS financial statements.

C. Actuarial valuation

Key Audit Matter Description

Reference may be made to note 6 of significant accounting policies and note 16 20 and21 to the standalone Ind AS financial statements of the Company.

There is a risk of material misstatement relating to the judgements made in valuing thedefined benefit obligation including the use of key assumptions specifically the discountrate life expectancy and inflation level. These variables can have a material impact incalculating the quantum of the retirement benefit liability.

Response to Key Audit Matter Principal Audit Procedures

Our audit procedures comprised of the following:

a. We determined whether the key assumptions are reasonable.

b. External actuaries were engaged to determine the amount of pension provisions.

c. We assessed the competence capabilities and objectivity of the experts gained anunderstanding of their work and the suitability of the results as audit evidence for therelevant assertions.

d. We examined the data made available to the experts for completeness and accuracy andgained an understanding of the process to determine the calculation inputs used.

Conclusion

Based on the procedures performed above we did not find any material exceptions withregards to the use of assumptions and actuarial valuation

Other information

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 Ind AS financial statements and our auditor's report thereon.

Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone Ind ASfinancial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone Ind AS financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact.

We have nothing to report in this regard.

Responsibilities of Management for the standalone ind AS 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 Ind ASfinancialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 amended. 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 standalone Ind ASfinancialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone Ind ASfinancial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

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

Auditor's Responsibilities for the Audit of the standalone ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial 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 Ind AS 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 standalone IndASfinancial 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 Ind AS financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.

• Evaluate the overall presentation structure and content of the standalone IndASfinancial statements including the disclosures and whether the standalone IndASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.

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 Ind ASfinancialstatements for the year ended March 312019 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would 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 the India in terms of sub-section (11) of section 143of the Act we give in the "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order.

2. As required by Section143 (3) of the Companies Act 2013 we report that:

(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;

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

(c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Cash Flow Statement and Statement of Changes in Equity dealt with by thisreport are in agreement with the books of account;

(d) In our opinion the aforesaid standalone Ind ASFinancial Statements comply with theAccounting Standards prescribed under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended.

(e) On the basis of the written representations received from the directors as on March312019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 312019 from being appointed as a director in terms of Section164(2) of theAct.

(f) With respect to the adequacy of the Internal Financial Controls Over FinancialReporting of the Company with reference to these standalone Ind ASfinancial statements andthe operating effectiveness of such controls refer to our separate report in"Annexure 2" to this report;

(g) In our opinion the managerial remuneration for the year ended March 31 2019 hasbeen paid/provided by the Company to its directors is in accordance with the provisions ofsection 197 read with Schedule V to the Act;

(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditor's) Rules 2014 as amended inour opinion and to the best of our information and according to the explanation given tous:

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind ASFinancial Statements. (Refer note 41 to the standaloneInd AS financial statements;

ii. The company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at March 312019.

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

For R.SundararaJan & Associates
Chartered Accountants
Firm Registration No: 008282S
Salem S. Krishnan - Partner
May 26 2019 Membership no.26452

"ANNEXURE 1" to the independent Auditor's Report referred to in paragraph 1under the heading 'Report on Other Legal and Regulatory Requirements' of our report ofeven date on the standalone ind AS financial statements of Sambandam Spinning MillsLimited

1. In respect of its fixed assets:

(a) The company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management during the yearand no material discrepancies have been noticed on such verification.

(c) According to the information and explanations given to us and based on theexamination of registered sale deeds/ transfer deeds/ conveyance deeds provided to us wereport that the title deeds of all the immovable properties are held in the name of theCompany.

2. As explained to us the inventories other than goods in transit have been physicallyverified at the year-end by the management and no material discrepancies were noticed onsuch physical verification.

3. (a) The Company has granted loan to one Company covered in the register maintainedunder section 189

of the Companies Act 2013. In our opinion and according to the information andexplanations given to us the terms and conditions of the grant of such loan is notprejudicial to the Company's interest.

(b) The Company has granted loan to one Company covered in the register maintainedunder section 189 of the Companies Act2013. The schedule of repayment of principal andpayment of interest has been stipulated for the loan granted and the repayment is regular.

(c) There are no amounts of loans granted to companies firms or other parties listedin the register maintained under section 189 of the Companies Act 2013 which are overduefor more than ninety days.

4. According to the information and explanations given to us the Company has compliedwith the provisions of sections 185 and 186 of the Companies Act 2013 in respect of grantof loans making investments and providing guarantees and securities as applicable.

5. According to information and explanations given to us the Company has not acceptedany deposits from public however in respect of the deposits accepted from shareholdersthe Company has complied with the directives issued by the Reserve Bank of India and theprovisions of sections 73 to 76 or any other relevant provisions of the Companies Act 2013and the Companies (Acceptance of Deposits) Rules 2014.

6. The maintenance of cost records has been specified by the Central Government underSection 148(1) of the Companies Act 2013. We have broadly reviewed the cost recordsmaintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014as amended and prescribed by the Central Government under Sub section (1) of Section 148of the Companies Act 2013 and are of the opinion that prima facie the prescribed costrecords have been made and maintained. However we have not made a detailed examination ofthe same.

7. According to the information and explanations given to us and the books of accountexamined by us in respect of statutory dues:

(a) Undisputed statutory dues including provident fund employees' state insuranceincome-tax goods and service tax Customs duty cess and any other statutory dues havegenerally been regularly deposited with the appropriate authorities though there has beena slight delay in few cases.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income tax goods andservice tax customs duty cess and other statutory dues were outstanding at year endfor a period of more than six months from the date they became payable.

(c) According to the records of the company the dues of employee state insurance andother statutory dues on account of any dispute are as follows:

Nature of dues Disputed dues (Rs.) Period to which the amount relates Forum where the dispute is pending
Corporation tax 17.05 October 1998 - March 2013 Madras High Court
Infrastructure and development amenities charges 66.75 July 2012 Madras High Court
Employees State Insurance 25.63 2003 - 04 to 2004 - 05 Salem Labour Court

8. The Company has not defaulted in repayment of dues to any financial institution orfrom banks.

9. The Company has not raised any money by way of initial public offer or furtherpublic offers (including debt instruments) during the year. Hence reporting on utilizationof such money does not arise.

10. To the best of our knowledge and belief and according to the information andexplanations given to us and considering the size and nature of the Company's operationsno fraud by the Company and no fraud of material significance on the Company by itsofficer's or employee's has been noticed or reported during the year.

11. According to the information and explanations given to us the company haspaid/provided managerial remuneration in accordance with the requisite approvals mandatedby the provisions of Section 197 read with Schedule V to the Companies Act 2013.

12. The Company is not a Nidhi Company and accordingly the provisions of Clause (xii)of the Order are not applicable to the Company.

13. In our opinion and according to the information and explanations given to us alltransactions with the related parties are in compliance with sections 177 and 188 of theCompanies Act 2013 where applicable. The details of the transactions during the yearhave been disclosed in the Standalone Ind AS financial statements as required by theapplicable Accounting Standards.

14. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underClause (xiv) of the Order is not applicable.

15. In our opinion and according to the information and explanations given to us theCompany has not entered into any non-cash transactions during the year with directors orpersons connected with them. Hence reporting on whether there is compliance withprovisions of section 192 of the Companies Act 2013 does not arise.

16. The Company is not required to be registered under section 45- IA of the ReserveBank of India Act 1934.

For R.SundararaJan & Associates
Chartered Accountants
Firm Registration No. 008282S
Salem S. Krishnan - Partner
May 26 2019 Membership no.26452

"ANNEXURE 2" to the independent Auditor's Report of even date on theStandalone ind AS Financial

Statements of Sambandam Spinning Mills Limited

Report on the internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of

Section 143 of the Companies Act 2013 ("the Act")

1. We have audited the internal financial controls over financial reporting ofSambandam Spinning Mills Limited ("the Company") as of March 31 2019 inconjunction with our audit of the Standalone Ind AS financial statements of the Companyfor the 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 byte Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.

Auditor's Responsibility

3. 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") issued by the Institute of Chartered Accountants of Indiaand the Standards on Auditing deemed to be prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

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 systemover financial reporting.

Meaning of internal Financial Controls over Financial Reporting

6. A company's internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (i) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and disposition of the assets of the company; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (iii) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

inherent Limitations of internal Financial Controls over Financial Reporting

7. Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

8. In our opinion to the best of our information and according to the explanationsgiven to us the Company has in all material respects an adequate internal financialcontrols system over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at March 312019 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For R. Sundararajan& Associates
Chartered Accountants
Firm Registration No.008282S
Salem S. Krishnan - Partner
May 26 2019 Membership no.26452