To the Members of Sanghvi Brands Limited
Report on the Standalone the Financial Statements
1. We have audited the accompanying standalone financial statements of SanghviBrands Limited (the Company) which comprise the Balance Sheet as at March31 2019 the Statement of Profit and Loss and the Cash Flow Statement for the year thenended and notes to the financial statements and a summary of significant accountingpolicies and other explanatory information.
2. 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 the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at March31 2019 and its loss and cash flows for the year ended on that date.
Basis for Opinion
3. 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 (the ICAI)together with the ethical requirements that are relevant to our audit of the financialstatements under the provisions of the Act and the Rules thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion.
Key Audit Matters
4. 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. Wehave determined the matters below to be the key audit matters to be communicated in ourreport.
|Key audit matter ||Response to Key audit matter |
|1. Testing of carrying value of Investment in Subsidiaries and Joint ventures was considered as key audit matter as it involved significant management judgement and reliance on future projections. ||Our audit approach was a combination of test of controls and substantive procedures which included the following: |
|The Company has 100% subsidiaries Sanghvi Beauty Sanghvi US Holding and Sanghvi Sri Lanka. It also holds 97.5% in Sanghvi Fitness. These entities are engaged in the business of providing beauty fitness and spa treatment. ||i. Tested the management oversight and controls over valuation of investments. |
|At 31st March19 the net worth of above-mentioned subsidiaries has eroded. ||ii. Obtained future projections and business plans for the subject entities prepared by the management and tested them for reasonableness of assumptions and arithmetic accuracy. reportable matters regarding investments and its valuation. |
|The existence of the above impairment indicator required management to estimate the recoverable amount of the Company's investment in subsidiary. || |
|2. Recognition of Intangible Assets ||Our audit approach and procedures included: Evaluating the reasonableness of management's conclusions on key assumptions including forecast cash flows focusing on revenues and earnings historical and budgetary financial information current market conditions and growth rates |
|During the year the Company acquired Intangible assets in the form of Business Rights amounting to Rs.361.20 lakhs. || |
|The business rights/non-compete arrangements were considered as intangible assets on the basis that by virtue of these agreements the Company has control over the territories for conducting business and the arrangements are expected to result in increased profits in future years. ||i. Assessing the reliability of management's forecast whilst considering the risk of management bias |
| ||ii. Obtained documentary evidence like agreements entered for acquiring business rights study of agreement |
| ||iii. Obtained future projections relating to these business rights |
| ||iv. Reviewed disclosures included in the notes to the accompanying standalone financial statements. |
| ||v. Testing of impairment at the end of year |
5. The Company's Board of Directors is responsible for the other information. The otherinformation obtained at the date of this auditor's report is included in the Director'sreport but does not include the financial statements and our auditor's report thereon.
6. Our opinion on the financial statements does not cover the other information and wedo not express any form of assurance conclusion thereon.
7. In connection with our audit of the financial statements our responsibility is toread the 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
8. If based on the work we have performed on the other information obtained prior tothe 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.
Responsibility of Management for Financial Statements
9. The Company's Board of Directors is responsible for the matters in section 134(5) ofthe Act with respect to the preparation of these financial statements that give a true andfair view of the financial position financial performance and cash flows of the Companyin accordance with the accounting principles generally accepted in India including theIndian Accounting Standards specified under Section 133 of the Act.
10. This responsibility also includes the maintenance of adequate accounting records inaccordance with the provision of the Act for safeguarding of the assets of the Company andfor preventing and detecting the frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of internal financialcontrol that were operating effectively for ensuring the accuracy and completeness of theaccounting 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.
11. In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
12. Those Board of Directors are also responsible for overseeing the Company'sfinancial reporting process.
13. 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.
14. As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also:
a. Identify and assess the risks of material misstatement of the financial statementswhether 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.
b. Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct 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.
c. Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
d. Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
e. 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.
15. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
16. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
Report on other Legal and Regulatory Requirements
17. As required by the Companies (Auditor's Report) Order2016 issued by the CentralGovernment of India in term of sub-section (11) of section 143 of the Act (theOrder) and on the basis of such checks of the books and records of theCompany as we considered appropriate and according to the information and explanationsgiven to us we give in the Annexure A a statement on the matters specified in theparagraphs 3 and 4 of the Order to the extent applicable.
18. 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 appears from our examination of those books;
c) the Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account;
d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014
e) On the basis of written representations received from the directors as on March 312019 taken on record by the Board of Directors none of the directors is disqualified ason March 31 2019 from being appointed as a director in terms of Section 164(2) of theAct.
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in Annexure B.
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 our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act.
h) With respect to the other matters included in the Auditor's Report in accordancewith Rule 11 of the Companies (Audit and Auditors) Rules 2014 (as amended) in our opinionand to the best of our information and according to the explanations given to us:
i. The Company does not have any pending litigations which would impact its financialposition.
ii. The Company did not have any long- term contracts including derivative contractsfor which there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
For B. K. Khare and Co.
Firm Registration No.: 105102W
Membership No.: 111212
Mumbai May 30 2019
ANNEXURE A TO THE AUDITOR'S REPORT
Referred to in paragraph 16 of our report of even date on the accounts of Members ofSanghvi Brands Limited for the year ended March 31 2019
1) i) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
ii) The property plant and equipment were physically verified during the year by theManagement in accordance with regular programme of verification which in our opinion isreasonable having regard to the size of the Company and the nature of its assets.According to the information and explanation given to us no material discrepancies werenoticed during the period.
iii) According to the information and explanation given to us no immovable property isheld by the Company in its own name.
2) Inventories were physically verified during the year by the management at reasonableintervals and no material discrepancies were noticed on physical verification. In ouropinion the frequency of verification is reasonable.
3) The Company has granted unsecured loan to four wholly owned subsidiary and onepartially owned subsidiary company covered in the register maintained under section 189 ofthe Act.
a. In our opinion rate of interest and other terms granted to conditions on which theloans had been granted to the wholly owned subsidiary company listed in the registermaintained under Section 189 of the Act were not prima facie prejudicial to the interestof the Company
b. In respect of the aforesaid loan the parties are repaying the principal amount asstipulated and are also regular in payment of interest as applicable.
c. In respect of the aforesaid loan there is no overdue amount.
4) In our opinion and according to the information and explanations given to usprovisions of section 185 and 186 of the Act in respect of loans given investment madeand guarantees given to parties covered under the respective sections have been compliedwith by the Company.
5) The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the Rules framed there under to the extentnotified. Therefore the provisions of Clause 3(v) of the Order are not applicable to thecompany.
6) According to the information and explanation given to us the provisions of theparagraph 3 (vi) of the Order are not applicable to the Company as the Company is notcovered by the Companies (Cost Records and Audit) Rules 2014.
7) i) According to the information and explanations given to us and the records of theCompany examined by us in our opinion except for certain dues in respect of Providentfund TDS and Profession Tax which have not been deposited till 31st March2019 the Company is generally regular in depositing undisputed statutory dues includingprovident fund employees' state insurance income tax goods and service tax sales taxwealth tax service tax duty of customs duty of excise value added tax and othermaterial statutory dues as applicable with the appropriate authorities. The extent ofarrears of statutory dues outstanding as at 31st March 2019 for a period ofmore than six months from the date they become payable are as follows-
ii) According to the information and explanations given to us and records of theCompany examined by us there are no dues of income tax sales tax wealth tax servicetax goods and service tax duty of custom and excise or value added tax or cess whichhave not been deposited on account of any dispute.
8) The Company has not taken any loans or borrowings from financial institution banksand government or has not issued any debentures.
Hence reporting under clause (viii) of the order is not applicable to company.
9) According to the information and explanations given by the management the Companyhas utilized the money raised by way of initial public offer for the purposes mentioned inthe prospectus of IPO. The unutilized portion of the IPO is deployed in fixed termdeposit.
10) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of fraud by the Company or no material fraud on the Company by its officers oremployees noticed or reported during the year nor have we been informed of such case bythe Management.
|Name of the Statute ||Nature of Dues ||Amount (Rs.) ||Period to which amount relates ||Due date ||Date of payment |
|THE EMPLOYEES' PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT 1952 ||Provident Fund ||20098 ||July 18-Sept18 ||15th of respective month ||Not paid |
|Profession Tax Act 1975 ||Profession Tax ||1620 ||Aug18-Sept18 ||21st of respective month ||Not paid |
| ||TOTAL ||21718 || || || |
11) Based on the records examined by us and according to information and explanationsgiven to us the Company has paid/provided for managerial remuneration in accordance withthe requisite approvals mandated by provisions of section 197 read with schedule V of theAct.
12) As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provisions of Clause 3(xii) of the Order are not applicable to the Company
13) The Company has entered into transactions with related parties in compliance withthe provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the standalone financial statements as required byapplicable accounting standard.
14) The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of Clause (xiv) of the Order are not applicable to the Company.
15) The Company has not entered into any non-cash transactions with its directors orpersons connected with him. Accordingly the provisions of clause (xv) of the Order arenot applicable to the Company.
16) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of clause (xvi) of the Order are notapplicable to the Company.
For B. K. Khare and Co.
Firm's Registration No. : 105102W
Membership No.: 111212
Mumbai May 30 2019
ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THEFINANCIAL STATEMENTS OF SANGHVI BRANDS LTD
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 SanghviBrands Limited (the Company) as of March 31 2019 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
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 (the 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 Act.
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 Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.
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 included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement 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 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 authorizations of management and directors of the company; and
3 Provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition use or disposition of the company's assets that could have a material effecton 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 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 2019 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 issued by the ICAI.
For B. K. Khare & Co.
Firm Registration No. 105102W
Membership No. 111212
Mumbai May 30 2019