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Sanco Industries Ltd.

BSE: 532120 Sector: Industrials
NSE: SANCO ISIN Code: INE782L01012
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Sanco Industries Ltd. (SANCO) - Auditors Report

Company auditors report

TO THE MEMBERS OF SANCO INDUSTRIES LIMITED

Report on the Audit of Standalone Financial Statements

Opinion

We have audited the accompanying Standalone financial statements of SANCO INDUSTRIESLIMITED (the "Company") which comprise the Balance Sheet as at March 312021 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Statement of Cash Flows ended on that date and asummary of significant accounting policies and other explanatory information (hereinafterreferred to as the "standalone financial statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone financial statements give the information requiredby the Companies Act 2013 (the "Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2021 the loss and totalcomprehensive loss changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing ("SA"s) specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor’sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India ("ICAI") together with theethical requirements that are relevant to our audit of the Standalone financial statementsunder the provisions of the Act and the Rules made thereunder and we have fulfilled ourother ethical responsibilities in accordance with these requirements and the ICAI’sCode of Ethics. We believe that the audit evidence obtained by us is sufficient andappropriate to provide a basis for our audit opinion on the standalone financialstatements.

Emphasis of Matter

Based on our review conducted as above we observed that company having CashCredit (CC) accounts with South Indian Bank & Union Bank of India and loan accountswith HDFC Bank & Aditya Birla Finance Ltd has become Non- Performing Assets (NPA) asper banking rules and regulations. The company is also irregular while paying itsundisputed and disputed statutory liabilities. We observed that undisputed and disputedstatutory liabilities which are pending for more than 6 months with respect to ESIC EPFand Income Tax has also not been paid till the date of this report.

We have not been provided any reconciliation of balances of Creditors as wellas with Debtors. We have been provided GST reconciliation which is not reconciled with GSTReturns. Hence we are unable to comment upon the accuracy of these balances.

Long term outstanding balances in some of personal and impersonal accountsare subject to confirmation and reconciliation.

There are following material uncertainties that may cast significant doubtabout the company’s ability to continue as a going concern such as company has noworking capital to run its factory in foreseeable future as all the loan facilities hasbeen NPA & most of its Debtors are outstanding for more than a year and underlitigation. Further its turnover is declining drastically in past few years.

Stock register Fixed Asset Register and some of the E-way bills for sale andpurchase etc. are not provided to us for verification.

Key Audit Matters

Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide a separateopinions on these matters. We have determined the matters described below to be the keyaudit matters to be communicated in our report.

Property Plant and Equipment and Intangible Assets

There are areas where management judgments impacts the carring value of property plantand equipment intangible assets and their respective depreciation and amortizationamounts. These includes the decision to capitalize or expense costs; the annual asset lifereview: the timelines of the capitalization of assets and the use of managementassumptions and estimates for the determination of the measurement and recognitioncriteria for assets retired from active use. Due to the materiality in the context of thebalance sheet of the company on the level of judgment and estimates required we considerto be a key audit matter.

Response to Key Audit Matter

We assessed the controls in place evaluated the appropriateness of capitalizationprocess performed tests of details on costs capitalized the timeliness of thecapitalization of the assets and the DE recognition criteria for the assets retired fromactive use. In performing these procedures we reviewed the judgment made by managementincluding the nature of the underling costs capitalized: Determination of realizable valueof the assets retired from active use: The appropriateness of asset live applied in thecalculation of depreciation; useful lives of assets as per the technical assessment of themanagement and external technical experts. We have observed that there are no materialschanges.

Revenue Recognition

Revenue recognition is significant audit risk across all units within the Company riskexists that revenue is recognized without substantial transfer of control and is not inaccordance with Ind AS-115 "Revenue from Contracts with Customers".

Response to Key Audit Matter

Our audit consisted testing of the design and operating effectiveness of the internalcontrols and substantive as follows:

• We have evaluated the design of internal controls relating to revenuerecognition.

• We selected samples of Sales and transactions and tested the operatingeffectiveness of the internal control relating to revenue recognition. We carried out acombination of procedures involving inquiry and observation performance and inspection.

• We have tested samples of Sale transaction to their respective underlyinginvoices and related documents.

• We have performed cut-off procedures for sample of revenue transactions atyear-end in order to conclude on whether they were recognized in accordance with IndAS-115.

Evaluation of Uncertain Tax Positions

The Company has material uncertain tax positions including matters under dispute whichinvoices significant judgment to determine the possible outcome of these disputes.

Response to Key Audit Matters

Obtained details of completed tax assessments and demands for the year ended March 312021 from management. We involved our internal experts to challenge the management’sunderlying assumptions in estimating the text provision and the possible outcome of thedisputes. Our internal experts also considered legal precedence and other rulings inevaluating management’s position on these uncertain position. Additionally weconsider the effect of new information in respect of uncertain tax positions as at April1 2021 to evaluate whether any change was required to management’s to theseuncertainties.

Information Other than the Financial Statements and Auditor’s Report Thereon

The Company’s Board of Directors and Management is responsible for the preparationof the other information. The other information comprises the information included in theManagement Discussion and Analysis Board’s Report including Annexures toBoard’s Report Business Responsibility Report Corporate Governance Report andShareholder Information but does not include the standalone financial statements and ourauditor’s report thereon.

Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Responsibility of Management and Those Charged with Governance (TCWG)

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 and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.

In preparing the standalone financial statements management is responsible forassessing the Company’s ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

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

Auditor’s Responsibility

Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor’s report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgement andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Financial Resultswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether thecompany has adequate internal financial controls with reference to standalone financialstatement in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates made by the Board of Directors.

• Conclude on the appropriateness of the Board of Directors’ use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theability of the Company to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor’s report to therelated disclosures in the standalone Financial Statement 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 conditionsmay cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of the FinancialResults including the disclosures and whether the Financial Results represent theunderlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in

(i) planning the scope of our audit work and in evaluating the results of our work; and

(ii) to evaluate the effect of any identified misstatements in the standalone financialstatements.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor’s report unless law or regulation precludes public disclosure aboutthe matter or when in extremely rare circumstances we determine that a matter should notbe communicated in our report because the adverse consequence of doing so would reasonablybe expected to outweigh public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143 (3) of the Act we report that:

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

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

(c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flows dealt with by thisReport are in agreement with the relevant books of account.

(d) In our opinion the aforesaid standalone financial statements comply with the IndAS specified under Section 133 of the Act.

(e) On the basis of the written representations received from the directors as on 31/03/2021taken on record by the Board of Directors none of the directors is disqualified as on 31/03/2021from being appointed as a director in terms 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 A". Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the Company’s internalfinancial controls over financial reporting.

(g) 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 as amended : In ouropinion and to the best of our information and according to the explanations given to usthe remuneration paid by the Company to its directors during the year is in accordancewith the provisions of section 197 of 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 Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. There are pending litigations by and against the Company as at March 31 2021 whichmay impact its financial position but no provision has been made as in the opinion of themanagement the amount cannot be estimated and will be dealt with in the year in which thedispute is settled and the Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements.

ii. The Company has made provision as required under the applicable law or applicableaccounting 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.

2. As required by the Companies (Auditor’s Report) Order 2016 ("theOrder") issued by the Central Government in terms of Section 143(11) of the Act wegive in "Annexure B" a statement on the matters specified in paragraphs 3 and 4of the Order.

For GAUR & ASSOCIATES
Chartered Accountants
FRN: 005354C
Sd/-
S. K. Gupta
Partner
M. No. 016746 Place: New Delhi
UDIN: 21016746AAAAE28931 Date: 30/06/2021

"Annexure A" to the Independent Auditor’s Report

(Referred to in paragraph 1(f) under ‘Report on Other Legal and RegulatoryRequirements’ section of our report to the Members of SANCO INDUSTRIES LIMITED ofeven date)

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

We have audited the internal financial controls over financial reporting of SANCOINDUSTRIES LIMITED as of March 31 2021 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that 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. 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 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 control system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reportingassessing the risk that a material weakness exists and operating effectiveness ofinternal control based on the assessed risk. The procedures selected depend upon on theauditor's judgment including the assessment of the risks of material misstatement of thestandalone 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 controlssystem over 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 standalone 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

(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 standalone financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the standalone 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.

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 March 31 2021 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls over Financial Reporting issues by the Institute of CharteredAccountants of India.

For GAUR & ASSOCIATES
Chartered Accountants
FRN: 005354C
S. K. Gupta
Partner
M. No. 016746 Place: New Delhi
UDIN: 21016746AAAAE28931 Date: 30/06/2021

Annexure ‘B’ to the Independent Auditor’s Report

(Referred to in paragraph 2 under ‘Report on Other Legal and RegulatoryRequirements’ section of our report to the Members of SANCO INDUSTRIES LIMITED ofeven date)

i. In respect of the Company’s fixed assets: a) The Company has not provided usany records showing full particulars including quantitative details and situation offixed assets.

b) The Company did not provide us any document for program of verification to cover allthe items of fixed assets.

c) According to the information and explanations received by us as the company did notprovide us any deed or documents relating to immovable property. Hence we are unable tocomment under this clause.

ii. The Company did not provide any physical verification report of inventory. Hencewe are unable to comment under this clause.

iii. The company has not granted any loans or advances in the nature of loans toparties covered in the register maintained under section 189 of the Companies Act 2013.Hence the question of reporting whether the terms and conditions of such loans areprejudicial to the interests of the company whether reasonable steps for recovery of overdues of such loans are taken does not arise.

iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Act in respect ofgrant of loans making investments and providing guarantees and securities as applicable.

v. Based on our scrutiny of the company's records and according to the information andexplanations provided by the management in our opinion the company has not accepted anyloans or deposits which are 'deposits' within the meaning of Rule 2(b) of the Companies(Acceptance of Deposits) Rules 2014 and therefore the provisions of the clause 3(v) ofthe Order are not applicable to the Company.

vi. We have broadly reviewed the cost records maintained by the company u/s 148(1) ofthe Act and are of the opinion that prima-facie the prescribed records have been mademaintained.

vii. According to the information and explanations given to us in respect of statutorydues:

a) The Company is not depositing undisputed statutory dues including Provident FundEmployees’ State Insurance Income Tax Goods and Service Tax and other materialstatutory dues applicable to it with the appropriate authorities.

b) There are undisputed amounts payable in respect of Provident Fund Employees’State Insurance Income Tax Goods and Service Tax Customs Duty Cess and other materialstatutory dues in arrears as at March 31 2021 for a period of more than six months fromthe date they became payable.

S. No. Nature of Liability Amount
1. Provident Fund Total outstanding Rs. 1254866/-
2. ESI Total outstanding Rs. 751017/-
3. Income Tax Payable Total outstanding Rs. 31702723/-

c) Details of dues of sales tax/income-tax/value added tax/customs duty/exciseduty/cess which have not been deposited on account of any dispute are given under:

Nature of the Statute Nature of Dues Forum where dispute is pending Period to which the amount relates Remarks
The Income Tax Act 1961 Income Tax CIT (Appeals) AY 2014-15 Rs. 63.33 (Order of appellate authority pass in favour of the company.
The Income Tax Act 1961 Income Tax CIT (Appeals) AY 2012-13 Copy of Assessment Order not provided by the management
The Income Tax Act 1961 Income Tax CIT (Appeals) AY 2017-18 Copy of Assessment Order not provided by the management

viii. Based on our audit procedures and on the information and explanations given bythe management we are of the opinion that the company has defaulted in repayment of loansor borrowing to a financial institution banks or dues to debenture- holders.

Name of the Bank Nature of Dues Amount Due date Status
South Indian Bank (CC A/c) Principal and Interest Rs. 136376330.43/- Various dates and not paid any interest during the year The company bank CC Account has become Non- Performing Asset (NPA) as per the banking rules and regulations. As the company is irregular in paying the outstanding amount.
UBI Delhi (CC A/c) Principal and Interest Rs. 312779994/- Various dates The company bank CC Account has become Non- Performing Asset (NPA) as per the banking rules and regulations. As the company is irregular in paying the outstanding amount.

ix. The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) or term loans and hence reporting under clause 3(ix) ofthe Order is not applicable to the Company.

x. Based upon the audit procedures performed and information and explanations given bythe management we report that no fraud on the company by its officers or employees norany fraud by the company has been noticed or reported during the course of our audit.

xi. In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.

xii. The Company is not a Nidhi Company and hence reporting under clause 3(xii) of theOrder is not applicable to the Company.

xiii. In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the standalone financial statements as required by theapplicable accounting standards.

xiv. During the year the Company has made preferential allotment of equity shares.

xv. In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsDirectors or persons connected to its directors and hence provisions of section 192 of theCompanies Act 2013 are not applicable to the Company.

xvi. The company is not a Non-Banking Financial Company and is not required to beregistered under section 45-I of the Reserve Bank of India.

For GAUR & ASSOCIATES
Chartered Accountants
FRN: 005354C
S. K. Gupta
Partner
M. No. 016746 Place: New Delhi
UDIN: 21016746AAAAE28931 Date: 30/06/2021

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