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Sarla Performance Fibers Ltd.

BSE: 526885 Sector: Industrials
NSE: SARLAPOLY ISIN Code: INE453D01025
BSE 00:00 | 03 Jun 18.49 0.69
(3.88%)
OPEN

18.85

HIGH

18.86

LOW

17.79

NSE 00:00 | 03 Jun 18.30 0.55
(3.10%)
OPEN

18.00

HIGH

18.85

LOW

18.00

OPEN 18.85
PREVIOUS CLOSE 17.80
VOLUME 22872
52-Week high 29.20
52-Week low 10.85
P/E 3.95
Mkt Cap.(Rs cr) 154
Buy Price 17.89
Buy Qty 1.00
Sell Price 18.49
Sell Qty 50.00
OPEN 18.85
CLOSE 17.80
VOLUME 22872
52-Week high 29.20
52-Week low 10.85
P/E 3.95
Mkt Cap.(Rs cr) 154
Buy Price 17.89
Buy Qty 1.00
Sell Price 18.49
Sell Qty 50.00

Sarla Performance Fibers Ltd. (SARLAPOLY) - Auditors Report

Company auditors report

To the Members of Sarla Performance Fibers Limited

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

QUALIFIED OPINION

We have audited the accompanying standalone financial statements of Sarla PerformanceFibers Limited ( the Company ) which comprise the Balance Sheet as at 31st March 2019the Statement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year then ended and notes to thestandalone financial statements including a summary of significant accounting policiesand other explanatory information (hereinafter referred to as the standalone financialstatements ).

In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion section of our report the aforesaid standalone financial statementsgive the information required by the Companies Act 2013 ( the Act ) in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under Section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ( Ind AS ) and other accounting principles generallyaccepted in India of the state of affairs (financial position) of the Company as at 31stMarch 2019 the profit and total comprehensive income (financial performance) changes inequity and its cash flows for the year ended on that date.

BASIS FOR QUALIFIED OPINION

The Company has an exposure to its Wholly owned Subsidiary Sarlaflex Inc. of Rs. 596lakhs towards investment in equity and towards unsecured loan of Rs.7860 lakhs as on 31stMarch 2019. The Company also has indirect exposure in Sarlaflex Inc. by way of unsecuredloans amounting to Rs. 5903 lakhs through its wholly owned subsidiary Sarla OverseasHoldings Limited.

Sarlaflex Inc has suspended manufacturing operations since December 2017 and has anegative net worth as on 31st March 2019. These conditions raise substantial doubt aboutits ability to continue as a going concern.

In the absence of any impairment testing by management during the year we are unableto comment on the impact if any on the total comprehensive income and retained earningsin the standalone financial statements (refer note 7 and note 9 of standalone financialstatements).

We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor sResponsibilities for the Audit of the standalone 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 the independencerequirements that are relevant to our audit of standalone financial statements under theprovisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI s Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our qualified opinion on standalone financial statements.

KEY AUDIT MATTERS

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.

Except for the matter described in the Basis for Qualified Opinion we have determinedthat there are no other key audit matters to communicate in our report.

INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS AND AUDITOR S REPORT THEREON

The Company s Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisBoard s Report including Annexures to Board s Report Corporate Governance Report butdoes not include the standalone financial statements and our auditor s report thereon. Theabove reports are expected to be made available to us after the date of this auditor sreport.

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 identified above when it becomes available and in doingso consider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.

If we conclude that there is a material misstatement therein we are required tocommunicate the matter to those charged with governance.

RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE STANDALONEFINANCIAL STATEMENTS

The Company s Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance totalComprehensive Income changes in equity and cash flows of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India including theAccounting Standards specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the financial statements 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 Board of Directors either intends to liquidate the Company orto cease operations 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 RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

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. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone 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 standalone 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 financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Companies Act 2013 we are also responsible for expressing our opinionon whether the company has adequate internal financial controls with reference tostandalone financial statements in place and the operating effectiveness of such controls.

Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

Conclude on the appropriateness of management s use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Company s abilityto continue as a going concern. If we conclude that a material uncertainty exists we arerequired to draw attention in our auditor s report to the related disclosures in thestandalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor s report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

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 them allrelationships and other matters that may reasonably be thought to bear on our independenceand 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 about thematter or when 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 Section 197(16) of the Act we report that the Company haspaid remuneration to its directors during the year in accordance with the provisions ofand limits laid down under Section 197 read with Schedule V to the Act.

2. 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 paragraphs 3and 4 of the Order to the extent applicable.

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

a) We have sought and except for the possible effects of the matter described inthe Basis for Qualified Opinion paragraph obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;

b) Except for the possible effects of the matter described in the Basis forQualified Opinion paragraph in our opinion proper books of account as required by lawhave been kept by the Company so far as it appears from our examination of those books;

c) The Balance Sheet the Statement of Profit and Loss including OtherComprehensive Income the Statement of Changes in Equity and the Cash Flow Statement dealtwith by this Report are in agreement with the relevant books of account;

d) Except for the possible effects of the matter described in the Basis forQualified Opinion paragraph in our opinion the aforesaid standalone financial statementscomply with the Ind AS specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014;

e) The matters described under the Basis for Qualified Opinion paragraph in ouropinion may have an adverse effect on the functioning of the Company;

f) On the basis of the written representations received from the directors as on31st March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in terms of Section164(2) of the Act;

g) With respect to the adequacy of the internal financial controls withreference to standalone financial statements of the Company and the operatingeffectiveness of such controls refer to our separate Report in Annexure B . Our reportexpresses an unmodified opinion on the adequacy and operating effectiveness of the Companys internal financial controls with reference to financial statements;

h) With respect to the other matters to be included in the

Auditor s Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 as amended in our opinion and to the best of our information and accordingto the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements - Refer Note 46.1 to the standalonefinancial statements;

ii. Except for the possible effects of the matter described in the Basis forQualified Opinion paragraph the Company has made provision as required under theapplicable law or accounting standards for material foreseeable losses if any on longterm contracts including derivative contracts;

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

For C N K & Associates LLP
Chartered Accountants
Firm Registration Number: 101961W/W-100036
Himanshu Kishnadwala
Place: Mumbai Partner
Date: 23 May 2019 Membership No.: 37391

Annexure A to Independent Auditor's Report

[Referred to in paragraph 1 under Report on Other Legal and Regulatory Requirements inthe Independent Auditor s Report of even date to the members of Sarla Performance FibersLimited ( the Company ) on the standalone financial statements for the year ended 31stMarch 2019]

(i) (a) The Company is in the process of updating its fixed assets register inrespect of addition to assets during the year to depict full particulars includingquantitative details and situation of property plant and equipment.

(b) The Company has a regular program of physical verification of fixed assetsunder which fixed assets are verified in a phased manner over a period of three yearswhich in our opinion is reasonable having regard to the size of the Company and thenature of its assets. In accordance with this program certain fixed assets were verifiedduring the year and no material discrepancies were noticed on such verification;

(c) According to the information and explanations given to us and on the basisof our examination of the records of the Company the title deeds of immovable propertyare held in the name of the company except in the following case:

Particulars Number of Cases Gross Block Net Block Remarks
(Rs. in Lakhs) (Rs. in Lakhs)
Freehold Land 1 3029 3029 Document of title in the name of two directors of the company. As informed to us the Company is in the process of getting the title deeds registered in its name.

(ii) As explained to us the inventories were physically verified during the yearby the management at reasonable intervals and no material discrepancies were noticed onphysical verification;

(iii) The Company has not granted any loans secured or unsecured to companiesfirms limited liability partnerships or other parties covered in the register maintainedunder Section 189 of the Act. Accordingly paragraphs 3(iii)(a) 3(iii)(b) and 3(iii)(c)of the Order are not applicable;

(iv) According to the information and explanations given to us the Company hascomplied with the provisions of Section 185 of the Act. The Company has made equityinvestments has given interest free loans and provided stand by letter of credit to itswholly owned subsidiaries. According to information and explanations given to us saidloans given investments made and stand by letter of credit given are for business purposeand are within the limit of Sec 186(2) of the Act;

(v) According to the information and explanations given to us the Company has notaccepted any deposits from public within the provisions of Sections 73 to 76 of the Actread with The Companies (Acceptance of Deposits) Rules 2014 and other relevant provisionsof the Act and therefore provisions of paragraph 3(v) of the Order are not applicable tothe Company;

(vi) We have broadly reviewed the cost records maintained by the Companypursuant to the Companies (Cost Records and Audit) Rules 2014 as specified by theCentral Government under sub section (1) of Section 148 of the Act and are of the opinionthat prima facie the prescribed cost records have been made and maintained. We havehowever not made a detailed examination of the same with a view to determining whetherthey are accurate or complete;

(vii) According to the information and explanations given to us in respect ofstatutory dues:

(a) The Company has been regular in depositing undisputed statutory duesincluding provident fund employees state insurance income-tax sales-tax service taxGoods and Service tax duty of customs duty of excise value added tax cess and anyother material statutory dues applicable to it to the appropriate authorities;

(b) There were no undisputed amounts payable in respect of provident fundemployees state insurance income-tax sales-tax service tax Goods and Service tax dutyof customs duty of excise value added tax cess and other material statutory duesapplicable to it were outstanding as on the last day of the financial year for a periodof more than six months from the date they became payable;

(c) Details of income-tax sales-tax service tax Goods and Service tax duty ofcustoms duty of excise value added tax have not been deposited as on 31st March 2019 onaccount of any dispute are as under:

Name of the Statute Forum where dispute is pending Period to which the amount relate Amount Involved Amount Unpaid
(Rs. in lakhs) (Rs. in lakhs)
The Central Excise Act 1944 Supreme Court of India FY 1995-96 1996-97 150 75
The Central Excise Act 1944 CESTAT FY 1995-96 1996-97 972 972
Custom Act 1962 CESTAT FY 2011-12 2016-17 1158 768

(viii) According to the information and explanations given to us based on ourexamination of books and records the Company has not defaulted in the repayment of loansor borrowing to banks. The Company does not have any loans and borrowings from financialinstitutions government and has not issued any debentures;

(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) during the year. According to the informationand explanations given to us money raised by way of term loans during the year have beenapplied for the purpose for which those were raised;

(x) 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 no instances of fraud by theCompany or on the Company by its officers or employees have been noticed or reportedduring the year;

(xi) According to the information and explanations given to us the Company haspaid / provided managerial remuneration in accordance with the requisite approvalsmandated by the provisions of Section 197 read with schedule V to the Act;

(xii) According to the information and explanations given to us the Company is nota Nidhi Company. Accordingly paragraph 3(xii) of the Order is not applicable;

(xiii) According to the information and explanations given to us transactions withthe related parties are in compliance with Sections 177 and 188 of the Companies Act2013 where applicable for all transactions with related parties and the details of suchtransactions have been disclosed in the standalone financial statements etc. as requiredby the applicable Indian Accounting Standards;

(xiv) According to the information and explanations given to us the Company hasnot made any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year. Accordingly paragraph 3(xiv) of the Order is notapplicable;

(xv) According to the information and explanations given to us during the year theCompany has not entered into non-cash transactions with directors or persons connectedwith them;

(xvi) The Company is not required to be registered under Section 45- IA of theReserve Bank of India Act 1934.

For C N K & Associates LLP
Chartered Accountants
Firm Registration Number: 101961W/W-100036
Himanshu Kishnadwala
Place: Mumbai Partner
Date: 23 May 2019 Membership No.: 37391

Annexure B to Independent Auditor's Report

[Referred to in paragraph 3(g) under Report on Other Legal and Regulatory Requirementsin the Independent Auditor s Report of even date to the members of Sarla PerformanceFibers Limited ( the Company ) on the standalone financial statements for the year ended31st March 2019]

REPORT ON THE INTERNAL FINANCIAL CONTROLS UNDER CLAUSE (i) OF SUB-SECTION 3 OF SECTION143 OF THE ACT

We have audited the internal financial controls with reference to financial statementsof Sarla Performance Fibers Limited ( the Company ) as of 31st March 2019 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat 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 criteria established by the Companyconsidering the essential components of internal controls stated in the Guidance Note onAudit of Internal Financial Controls over Financial Reporting issued by the Institute ofChartered Accountants of India ( ICAI ). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to Company s policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under the Act.

AUDITOR S RESPONSIBILITY

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 on Audit of Internal Financial Controls overFinancial Reporting (the Guidance Note ) and the Standards on Auditing specified underSection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols both issued by the ICAI. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls with reference to financialstatements were established and maintained and if such controls operated effectively inall 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 internal financial controls withreference to financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor s judgment including theassessment of the risks of material misstatement of the financial statements whether dueto 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 control withreference to financial statements includes those policies and procedures that:

1. pertain to the maintenance of records that in reasonable detail accuratelyand fairly reflect the transactions and dispositions of the assets of the company;

2. provide reasonable assurance that transactions are recorded as necessary topermit preparation of 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 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 control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

OPINION

In our opinion the Company has in all material respects an adequate internalfinancial controls with reference to financial statements and such internal financialcontrols with reference to financial statements were operating effectively as at 31stMarch 2019 based on the internal control with reference to financial statements 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 ICAI.

For C N K & Associates LLP
Chartered Accountants
Firm Registration Number: 101961W/W-100036
Himanshu Kishnadwala
Place: Mumbai Partner
Date: 23 May 2019 Membership No.: 37391