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 31 March 2019 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 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 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 of the stateof affairs (financial position) of the Company as at 31 March 2019 and its profit(financial performance including other comprehensive income) its cash flows and thechanges in equity for the year ended on that date.
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.
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) Revenvue Recognition :
The Company has adopted "Ind-AS 115 - Revenue from Contracts with Customers"which is the new 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.
Auditors Response: Principal Audit Procedure Our audit work included butwas 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 and afteryear end:
Verified the customer contracts for delivery terms.
Verified the customer acknowledgements to evidence proof of delivery for domestic salesat or near period end and tracked shipments through bill of lading for export sales
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 material misstatement inthe revenue recognised in the year ended on 31 March 2019. b) Litigation claims andrelated 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 used in theoperations and different IT systems used for maintaining Fixed Asset Register (FAR)requires more attention to ensure reasonably accurateness and completeness of financialreporting in respect of Property Plant and Equipments.
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 as per the Ind-AS16
We have carried out substantive audit procedures at financial and assertionlevel to verify the capitalization of asset as Property Plant and Equipment.
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 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 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 andassertion level to verify the allocation of overheads to Inventory.
We have verified the process documents in respect of the physicalverification of Inventory carried out by the management to verify the balance of theinventory at the year end.
We have verified the compliance with the standard norms relating toproduction as framed and timely updated by the management.
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.
Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder. We conducted our audit in accordancewith the Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal financial control relevant to the Company's preparation of thefinancial statements that give true and fair view in order to design audit procedures thatare appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of the accountingestimates made by Company's directors as well as evaluating the overall presentation ofthe financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion.
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 in the paragraph3 and 4 of the Order.
2 As required by section 143 (3) of the Act based on our audit we report to theextent applicable 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 and the Cash FlowStatement dealt with by this Report are in agreement with the books of account;
iv. in our opinion the Ind-AS financial statements comply with the Indian AccountingStandards prescribed under Section 133 of the Act read with relevant rules issuedthereunder;
v. on the basis of written representations received from the directors as on 31 March2019 and taken on record by the Board of Directors none of the directors aredisqualified as on 31st March 2019 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 over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate 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 opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of Section 197 of the Act.
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 opinion and to the best ofour information and according to the explanations given to us: a) the Company hasdisclosed the impact of pending litigations on its financial positions in its financialstatements. Refer to Note 42 to the financial statements.
b) the Company has made provisions as required under the applicable law or accountingstandard the material foreseeable losses if any on long - term contracts includingderivative contracts.
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.
d) the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 08 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.
For Shah & Savla LLP
FRN: 109364W / W100143
Miral H. Nagda
Membership No.: 108135
Place : Mumbai
Date : 30 May 2019
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 2019. 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 all the fixed assets have been physically verified by themanagement in a phased periodical manner which in our opinion is reasonable having regardto the size of the company and nature of its fixed assets. As informed to us no materialdiscrepancies 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) The Company has not accepted any deposits from the public.
(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 records of the company undisputed statutory dues includingincome-tax sales-tax value added tax service tax custom duty excise duty cess andother material statutory dues applicable to it have generally been deposited with theappropriate authorities regularly. According to the information and explanations given tous no undisputed amounts payable in respect of the aforesaid dues were outstanding as at31st March 2019 for period of more than six months from the date they became payable.
b) Details of dues of Income Tax Sales Tax Service Tax Customs Duty Excise Dutyand Value Added Tax which have not been deposited as on March 31 2019 on account ofdisputes are given below :-
|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 ||3580450 ||A.Y. 2011-12 ||ITAT Bharuch |
|2 Income Tax Act 1961 ||Income tax ||715740 ||A.Y. 2011-12 ||CIT(Appeals) Bharuch |
(viii) Based on our audit procedures and on the information and explanations given bythe management we are of the opinion that the company has not defaulted in repayment ofdues to financial institution banks and there are no dues to debenture holders.
(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) In our opinion and according to the information and explanations given to us nomaterial fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the year.
(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. Thus the said clause is not applicable.
(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 188 and 177 of Companies Act 2013 where applicable and the details have beendisclosed in the financial statements as required by the Indian accounting standards.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and thus the said clause isnot applicable.
(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 them. Thus the said clause is not applicable.
(xvi) The Company is not required to be registered under Section 45 IA of the ReserveBank of India Act 1934.
For Shah & Savla LLP
Miral H. Nagda
Membership No.: 108135
FRN: 109364W / W100143
Place : Mumbai
Date : 30 May 2019
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 over financial reporting of SamratPharmachem Limited as at 31 March 2019 in conjunction with our audit of the financialstatements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The management is responsible for establishing and maintaining internal financialcontrols based on the internal control over financial reporting criteria established bythe Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI'). 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 Companies Act 2013.
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 auditors' 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 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.
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 over financial reporting and such internal financial controls over financialreporting were operating effectively as at 31 March 2019 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
For Shah & Savla LLP
Miral H. Nagda
Membership No.: 108135
FRN: 109364W / W100143
Place : Mumbai
Date : 30 May 2019