To the Members of
Samrat Pharmachem Limited
Report on the Financial Statements
We have audited the accompanying financial statements of Samrat Pharmachem Limited('the Company') which comprise the Balance Sheet as at 31st March 2021 the Statement ofProfit & Loss (including the Other Comprehensive Income) the Cash Flow Statement andthe Statement of Changes in Equity of the Company for the year then ended and notes to thefinancial statements including summary of significant accounting policies and otherexplanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 (Act') in the manner so required and give a true and fair viewin conformity with the accounting principles generally accepted in India including IndianAccounting Standards (Ind AS') specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) rules 2015 as amended and other accountingprinciples generally accepted in India of the state of affairs (financial position) ofthe Company as at 31st March 2021 and its profit (financial performance including othercomprehensive income) its cash flows and the changes in equity for the year ended on thatdate.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (ICAI') togetherwith the ethical requirements that are relevant to our audit of the financial statementsunder the provisions of the Act and the rules there under 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 on financial statements.
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.
We have determined the matter described below to be the key audit matters to becommunicated in our report.
a) Revenue Recognition :
The Company has adopted "Ind-AS 115 - Revenue from Contracts with Customers"which is the revenue accounting standard. The application and transition to thisaccounting standard is complex and is an area of focus in the audit.
Revenue for the Company consists primarily of sale of manufactured goodsrecognized as per the accounting policy described in Note 2(m) to the accompanyingfinancial statements.
The Company recognises revenue from sale of goods when it satisfies itsperformance obligation in accordance with the principles of Ind-AS 115 Revenue fromContracts with Customers adopted by the Company from the current year by transferringthe control of goods to its customers through delivery evidenced by acknowledgement ofreceipt of goods by such customers.
Considering the large volume of revenue transactions near period end there maybe a risk of revenue recognition occurring before the satisfaction of the performanceobligations by the company in accordance with the applicable Incoterms.
Considering the above factors revenue recognition was identified as a key auditmatter for the current year audit.
Principal Audit Procedure
Our audit work included but was not limited to the following procedures:
Obtained an understanding of the revenue and receivable business process andassessed the appropriateness of the accounting policy adopted by the company for revenuerecognition.
Evaluated design and implementation of the key controls around revenuerecognition including controls around contract approvals invoice verificationtransporter confirmations and customer acknowledgements.
Tested operating effectiveness of the above identified key controls over revenuerecognition near period end.
For samples selected from revenue recorded during specific period before andafter year end:
o Verified the customer contracts for delivery terms.
o Verified the customer acknowledgements to evidence proof of delivery for domesticsales at or near period end and o tracked shipments through bill of lading for exportsales
Tested the appropriateness of the disclosures made in the financial statementsfor revenue recorded during the year.
Based on our audit work we did not identify any evidence of materialmisstatement in the revenue recognised in the year ended on 31 March 2021.
b) Litigation claims and related provisions:
The company is in the pharmaceutical industry which is heavily regulated resulting inincreased exposure to litigation risk. These provisions are based on judgement andincorporated accounting estimates by management in determining the likelihood andmagnitude of an unfavorable outcome on the claims.
Evaluating the design and testing the operating effectiveness of controls in respect ofthe recognition and measurement of provisions towards litigation and claims in compliancewith Ind-AS 37 Provisions Contingent Liabilities and Contingent Assets.
Corroborating management's assessment by
making enquiries with the in-house/outsourced legal counsel of the company;
verifying correspondence orders and appeals in respect of open litigation;
Obtaining confirmations from external legal counsels where relevant and/ orevaluating legal opinions obtained by the management.
c) Property Plant and Equipments:
Peculiarity and technical complexities of Property Plant and Equipments CapitalWork-In-Progress used in the operations and different IT systems used for maintainingFixed Asset Register (FAR) requires more attention to ensure reasonably accurateness andcompleteness of financial reporting in respect of Property Plant and Equipments andCapital W.I.P.
Further due to technical complexities management is required to assess and makeestimates/judgments about capitalization estimated useful life impairment etc. which hasmaterial impact on Balance Sheet and operating results.
Auditors Response :
Our audit approach consisted of testing of the design and operating effectiveness ofthe internal controls and substantive testing as follows:
We assessed the Company's process regarding maintenance of records Valuationand accounting of transactions relating to Property Plant and Equipment and CapitalW.I.P. as per the Ind-AS 16
We have carried out substantive audit procedures at financial and assertionlevel to verify the capitalization of asset as Property Plant and Equipment and CapitalW.I.P.
We have verified the maintenance of records and accounting of transactionsregarding capital work in progress by carrying out substantive audit procedures atfinancial and assertion level.
We have reviewed management judgement pertaining to estimation of useful lifeand depreciation of the Property Plant and Equipment in accordance with Schedule II ofCompanies Act 2013.
We have verified the capitalization of borrowing cost incurred on qualifyingasset in accordance with the Ind-AS 23 Borrowing Cost.
Inventories constitutes material component of financial statement. Correctnesscompleteness and valuation are critical for reflecting true and fair financial results ofoperations.
Our audit approach consisted testing of the design and operating effectiveness of theinternal controls and substantive testing as follows:
We assessed the Company's process regarding Maintenance of records Valuationand accounting of transactions relating to Inventory as per the Ind-AS 2.
We have evaluated the design of Internal Controls relating to recording andvaluation of Inventory.
We have carried out substantive audit procedures at financial and assertionlevel to verify the allocation of overheads to Inventory.
We have verified the process documents in respect of the physical verificationof Inventory carried out by the management to verify the balance of the inventory at theyear end.
We have verified the compliance with the standard norms relating to productionas framed and timely updated by the management.
Information Other than the Financial Statements and Auditors' Report Thereon
The Company's Management and Board of Directors are responsible for the otherinformation. The other information comprises of Management Reports such as Board's ReportManagement Discussion and Analysis Corporate Governance Report and BusinessResponsibility Report but does not include the Financial Statements and our Auditors'Report thereon which we obtained prior to the date of this Auditor's Report and theremaining section of the Company's Annual Report which are expected to be made availableto us after that date.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated.
If based on the work we have performed on the other information that we obtained priorto the date of this Auditor's Report we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.
When we read the other sections of Annual Report (other than those mentioned above) ifwe conclude that there is a material misstatement therein we are required to communicatethe matter to those charged with governance and take necessary actions as applicableunder the applicable laws and regulations.
Management's Responsibility for the Financial 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 andpresentation of these financial statements that give a true and fair view of the financialposition financial performance (including Other Comprehensive Income) Cash Flows andchanges in equity of the Company in accordance with the accounting principles generallyaccepted in India including the Indian Accounting Standards (Ind-AS) specified underSection 133 of the Act read with relevant rules issued thereunder.
This responsibility also includes the maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the financial statements the Management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the Board of Directors either intends to liquidate the Companyor to cease operations or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financialreporting process. Auditor's Responsibility for 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 financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
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 in the financial statements made by theManagement and Board of Directors.
Conclude on the appropriateness of the Management and Board of Directors use ofthe going concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor's report tothe related disclosures in the financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report.
However future events or conditions may cause the Company to cease to continue as agoing concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves 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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditors' report unless law or regulation precludes public disclosure about the matter orwhen 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 of the Act we give inthe Annexure
A' a statement on the matters specified in the paragraph 3 and 4 of the Order to theextent
2 As required by section 143 (3) of the Act we report that:
i. we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;
ii. 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;
iii. the Balance Sheet and the Statement of Profit and Loss (including othercomprehensive income) the statement of changes in equity and the statement of Cash FlowStatement dealt with by this Report are in agreement with the books of account;
iv. in our opinion the aforesaid financial statements comply with the IndianAccounting Standards prescribed under Section 133 of the Act read with relevant rulesissued thereunder;
v. on the basis of written representations received from the directors as on 31st March2021 and taken on record by the Board of Directors none of the directors aredisqualified as on 31st March 2021 from being appointed as a director in terms of Section164 (2) of the Act.
vi. 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 B'; and
vii. With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of Section 197(16) of the Act amended:
In our opinion and according to the information and according to the explanations givento us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of Section 197 of the Act. The remuneration paid to anydirector is not in excess of the limit laid down under Section 197 of the Act. TheMinistry of Corporate Affairs has not prescribed other details under section 197 916)which are required to be commented upon by us.
viii. 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:
a) the Company has disclosed the impact of pending litigations on its financialpositions in its financial statements. Refer to Note 42 to the financial statements.
b) the Company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses.
c) Since the company has not declared any dividend in the recent past years no amountsare required to be transferred by the company to Investor Education & Protection Fund.
For Shah & Savla LLP
Miral H. Nagda
Membership No.: 108135
UDIN : 21108135AAAACE5295
Place : Mumbai
Date : 30 June 2021
Annexure A to the Auditors' Report
The Annexure referred to in our report to the members of Samrat Pharmachem Limited('the Company') for the year Ended on 31st March 2021. We report that:
(i) a) The company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of available information.
b) As explained to us substantial portion of the fixed assets have been physicallyverified by the management in a phased periodical manner which in our opinion isreasonable having regard to the size of the company and nature of its fixed assets. Asinformed to us no material discrepancies were noticed on such physical verification.
c) As per the information and explanation provided to us and as per the recordspresented before us the title deeds of immovable properties are held in the name of thecompany.
(ii) In our opinion the inventories have been physically verified by the managementduring the year at reasonable intervals and as explained to us no material discrepancieswere observed on physical verification.
(iii) The company has not granted any amount as loan to person covered in the Registermaintained under Section 189 of the Act and hence the sub-clauses dealing with the saidreporting are not applicable.
(iv) As per the information and explanation given to us the company has not grantedany loans to directors of the company and company has not made any investment through morethan two layers of investment companies. Thus the said clause is not applicable to thecompany.
(v) According to information and explanations given to us the Company has not acceptedany deposits from the public. Accordingly paragraph 3(v) of the order is not applicableto the Company.
(vi) We have been informed by the management that the Central Government of India hasnot prescribed the method of maintenance of cost records under sub-section (1) of Section148 of the Act and the rules framed there under.
(vii) a) According to the information and explanations given to us and on the basis ofour examination of the records of the company undisputed statutory dues includingIncome-Tax Sales-tax Goods and Services tax Custom duty Excise duty and Value AddedTax Cess and other material statutory dues applicable to it have generally been depositedwith the appropriate authorities regularly.
According to the information and explanations given to us no undisputed amountspayable in respect of the aforesaid dues were outstanding as at 31st March 2021 forperiod of more than six months from the date they became payable.
b) According to the information and explanations given to us the details of dues ofIncome Tax Sales Tax Goods and Service Tax Customs Duty Excise Duty and Value AddedTax which have not been deposited as on March 312021 on account of disputes are givenbelow :-
|Sr. No. ||Name of the Statute ||Nature of Dues ||Amount (in Rs.) ||Period to which amount relates ||Forum where dispute is pending |
|1 ||Income Tax Act 1961 ||Income tax ||715740 ||A.Y. 2011-12 ||CIT(Appeals) Bharuch |
(viii) In our opinion and according to the information and explanations given to usthe company has not defaulted in repayment of dues to financial institution banks. TheCompany did not have any debentures outstanding as at the year end.
(ix) We have been informed by the management that during the period covered by ouraudit report the company did not raise any money by way of initial public offer orfurther public offer (including debt instruments) and Term Loans.
(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 information and explanations given to us theCompany has paid/provided for managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with limits specified under PartII of Schedule V to the Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi company. Accordingly paragraph 3 (xii) of the order is notapplicable.
(xiii) As per the information and explanations given to us & represented by themanagement we report that all the transactions with related parties are in compliancewith Section 177 and 188 of Companies Act 2013 where applicable and the details of suchtransactions have been disclosed in the financial statements as required by the Indianaccounting standards.
(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly paragraph 3(xiv) of the order is not applicable to the Company.
(xv) As per the information and explanations given to us & represented by themanagement during the year the company has not entered into any non-cash transactionswith its directors or persons connected with him. Accordingly paragraph 3(xv) of theorder is not applicable to the Company.
(xvi) According to the information and explanation given to us the Company is notrequired to be registered under Section 45- IA of the Reserve Bank of India Act 1934.
For Shah & Savla LLP
Miral H. Nagda
Membership No.: 108135
UDIN : 21108135AAAACE5295
Place : Mumbai
Date : 30 June 2021
Annexure B to the Auditors' Report
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 with reference to financial statementsof Samrat Pharmachem Limited ("the Company") as of 31st March 2021 inconjunction with our audit of the financial statements of the Company for the year endedon that date.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at 31st March 2021 based on the internal financial controlswith reference to financial statements 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 (the "Guidance Note").
Management's Responsibility for Internal Financial Controls
The Company's Management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. 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 Company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.
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 and the Standards on Auditing prescribed underSection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of such internal financial controlsassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to financial statements.
Meaning of Internal Financial Controls with reference to Financial Statements
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 include 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) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of 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) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls with reference to FinancialStatements
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 bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
For Shah & Savla LLP
Miral H. Nagda
Membership No.: 108135
UDIN : 21108135AAAACE5295
Place : Mumbai
Date : 30 June 2021