To the members of SBEC Sugar Limited
Report on the Consolidated Ind AS Financial Statements
We have audited the accompanying consolidated financial statements of SBEC SugarLimited (hereinafter referred to as "the Holding Company")and its subsidiaries(the Holding Company and its subsidiaries together referred to as "the Group")comprising of the consolidated balance sheet as at March 31 2020 the consolidatedstatement of profit and loss including other comprehensive income the consolidated cashflow statement the consolidated statement of changes in equity for the year then endedand a summary of significant accounting policies and other explanatory information(hereinafter referred to as "the consolidated Ind AS financial statements"). Inour opinion and to the best of our information and according to the explanations given tousexcept for the possible effects of the matter described in the Basis for QualifiedOpinion section of our report and based on the reports of other auditors as referredin the Other Matters paragraph the aforesaid consolidated financial statements give theinformation 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 principlesgenerally accepted in India of the consolidated state of affairs of the Company and itsSubsidiaries as at 31 March 2020 and the consolidated Profit consolidated TotalComprehensive Income the consolidated Statement of Changes in Equity and the consolidatedCash Flows for the year ended on that date.
Basis for Qualified Opinion
1) During the year ended 31st March 2020 the Company has not made provision forinterest on late payment of cane dues amounting to Rs.
797.84 lacs for the sugar season 2019-20 and Rs. 1923.37 lacs for sugar season 2018-19had the company made provisions the profit for the year would have been lower by Rs.2721.21 lacs respectively and its consequential impact on EPS.
2) The company has taken the debt of IDBI PNB & IFCI in Modi IndustriesLimited. As at 31st March 2020 the company has net exposure of Rs.14685 lacs. NoInterest on the said amount has been provided as there is no reasonable certainty of itscollection since the net worth of Modi Industries Limited has been completely eroded.Recoverability of the above balance is also doubtful. However no provisions for doubtfuldebts were made inthefinancialstatements of the company and consequently we are unable toopine on the appropriateness of the same and its consequential impact on the financialstatements.
3) The company has valued the closing stock of Inventory (Sugar) at Minimumselling price fixed by Government of India instead of " the lower of cost and netrealisable value" as required under IND AS-2 "Inventories". This hasresulted in overstatement of Inventories (Finished Goods-Sugar) by Rs. 1119.67 lacsprofit for the year by Rs. 1119.67 lacs and its consequential impact on EPS.
We conductedourauditoftheconsolidatedfinancialstatements in accordance with theStandards on Auditing(SAs)specifiedunder section 143(10) of the Act.
Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the consolidated 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 the consolidated Financial Statements underthe provisions of the Act and the Rules made thereunder 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 audit opinion on the Consolidated financial statements.
Emphasis of Matters
We draw attention to note no (
.)of the consolidated auditedfinancialstatement regarding interest payment on cane dues where the High Court vide itsorder dated 9th March 2017 has set aside the decision of State Government for the waiverof Interest for the year 2012-13 2013-14 and 2014-15 and asked the Cane Commissioner totake a final call in the matter pending final order the Company has not made provisionfor interest on the late payment of cane dues for years 2012-13 2013-14 and 2014-15. TheHon'ble Supreme Court vide its order dated 23.04.2018 has upheld the Hon'ble High Courtorder dated 9th March 2017. The matter is still sub-judice.
Under the power vested with the Cane Commissioner (U.P.) for waiver of interest underUP Sugar Cane (Regulation of Supply & Purchase) Act 1953 in respect of lossmaking/sick companies the company had made an application to Cane Commissioner (U.P.) forwaiver of interest on cane dues. Pending receipt of the Cane Commissioner's decision nointerest has been provided on the cane dues. The company has decided to account for thesame upon decision in the matter/payment. Our opinion is not modified in respect of thismatter.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the consolidated financial statements of the current period.We have determined that except for the matter described in the "Basis for QualifiedOpinion" section there are no other key audit matters to communicate in our report.
Information Other than the Consolidated Ind AS Financial Statements andAuditor's Report thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholders' Information Report but doesnot include the consolidated Ind AS financial statements and our auditor's report thereon.
Our opinion on the consolidated financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon. In connectionwith our audit of the consolidated Ind AS financial statements our responsibility is toread the other information and in doing so consider whether the other information ismaterially inconsistent with the consolidated 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 material misstatementof this other information we are required to report that fact. We have nothing to reportin this regard.
Responsibilities of Management and Those Charged with Governance for the consolidatedFinancial 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 ofthese consolidatedInd AS financial statements that give a true and fair view of theConsolidated Financial Position Consolidated Financial Performance Consolidated TotalComprehensive Income Consolidated Changes in Equity and Consolidated Cash Flows of theCompany including its subsidiaries in accordance with the Indian Accounting Standards (IndAS) and other accounting principles generally accepted in India including the AccountingStandards specified under section 133 of the Act. The Board of Directors of the Companyand of its Subsidiaries are responsible for maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgement and estimates that are reasonable and prudent; andthe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror which have been used for the purpose of preparation of the consolidatedInd ASfinancial statements by the Board of Directors of the Company. In preparing theconsolidated financial statements the Board of Directors of the Company and of itsSubsidiaries are responsible for assessing the ability of the Company and of itsSubsidiaries to continue as a going concern disclosing as applicable matters related togoing concern and using the going concern basis of accounting unless the Board ofDirectors either intends to liquidate the Company and of its Subsidiaries or to ceaseoperations or has no realistic alternative but to do so.
The respective Board of Directors of the Company and of its Subsidiaries are alsoresponsible for overseeing the financial reporting process of the Company and itsSubsidiaries
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidatedfinancial 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 consolidated financial statements. As a part of an audit inaccordance with SAs we exercise professional judgement and maintain professionalskepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated 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 Act we are also responsible for expressing our opinion on whether theCompany and its Subsidiary Companies which are Companies incorporated in India hasadequate internalfinancialcontrol system in place and the operating effectiveness of suchcontrols.
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 uncertaintyexists related to events or conditions that may cast significant doubt on the ability ofthe Company and its Subsidiaries to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor's report tothe related disclosures in the consolidated financial statements or if such disclosuresare inadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company and its Subsidiaries to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the consolidated financialstatements including the disclosures and whether the consolidated financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Obtain sufficientand appropriate audit evidences regarding the financial information ofthe Company andits Subsidiaries to express an opinion on the consolidated financialstatements. We are responsible for the direction supervision and performance of the auditof the financial statements of such entities included in the consolidated financialstatements of which we are the Independent Auditors. For the other entities included inthe consolidated financial statements which have been audited by other auditors suchother auditors remain responsible for the direction supervision and performance of theaudits carried out by them. We remain solely responsible for our audit opinion.
We communicate with those charged with governance of the Company and such otherentities included in the consolidated financial statements of which we are the IndependentAuditors regarding among other matters the planned scope and timing of the audit andsignificant audit findings including any significant deficiencies in internal controlthat 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 withthose charged with governance we determine those mattersthatwereofmostsignificancein theaudit of the consolidated financial statements of the current period and are therefore thekey audit matters. We describe these matters in our auditor's report unless law orregulation precludes public disclosure about the matter or when in extremely rarecircumstances we determine that a matter should not be communicated in our report becausethe adverse consequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication
Other Matters information of two subsidiaries included in the consolidatedfinancial results. whose financial statements / We did not audit the financialstatements/financial financial information reflect total assets of Rs 14753.13lacs (PY Rs.16379.39 lac) as at 31st March 2020 total revenues of Rs 1107.21Lacs (PY Rs 1653.75Lacs) total net loss after tax of Rs 417.50Lacs (PY Rs338.73 Lacs) total comprehensiveincome of Rs (4.11) Lacs (PY Rs. 0.12Lac) for the year ended on that date as consideredin the consolidated financial results. These financial statements have been audited byother auditors whose reports have been furnished to us by the Management and our opinionon the consolidated financial statements in so far as it relates to the amounts anddisclosures included in respect of these subsidiaries and our report in terms ofsub-sections (3) and (11) of Section 143 of the Act in so far as it relates to theaforesaid subsidiaries is based solely on the reports of the other auditors. Our opinionon the consolidated financial statements and our report on Other Legal and RegulatoryRequirements below is not modified in respect of the above matters with respect to ourreliance on the work done and the reports of the other auditors and the financialstatements certified by the Management.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act based on our audit 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 purpose of our audit of the aforesaidconsolidated financial statements.
(b) In our opinion proper books of accounts as required by law relating to preparationof aforesaid consolidated financial statements have been kept so far as it appears fromour examination of those books and reports of the other auditors.
(c) The Consolidated Balance Sheet the Consolidated Statement of Profit and Lossincluding Other Comprehensive Income the Consolidated Statement of Changes in Equity andthe Consolidated Statement of Cash Flows dealt with by this Report are in agreement withthe relevant books of accounts maintained for the purpose of preparation of theconsolidated financial statements.
(d) In our opinion the aforesaid consolidated financial statements comply with theIndian Accounting Standards specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended.
(e) On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors of the Company and the reports ofthe Statutory Auditors of its Subsidiaries Companies incorporated in India none of theDirectors of the Company and its Subsidiaries Companies incorporated in India isdisqualified as on 31st March 2020 from being appointed as a Director in terms of Section164(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"; which is based onthe auditor's reports of theCompany and its Subsidiaries Companies incorporated in India. Our report expresses anunmodified opinion on the adequacy and operating effectiveness of the internal financialcontrol over financial reporting of those Companies for reasons stated therein.
(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 opinionand to the best of our information and according to the explanations given to us andreports of the other auditors the remuneration paid by the Company and its SubsidiariesCompanies to its Directors during the year is in accordance with the provisions of Section197 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 as amended inour opinion and to the best of our information and according to the explanations given tous and reports of the other auditors:
i. The consolidated Ind AS financial statements disclose the impact of pendinglitigations on its consolidated financial position of the Group and its subsidiary ReferNote 29 totheconsolidatedIndASfinancialstatements;
ii. The Group and its subsidiaries did not have any material foreseeable losses inlong-term contracts including derivative contracts during the year ended March 31 2020.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Holding Company and its subsidiaries incorporated inIndia during the year ended March 31 2020.
For K. K. Jain & Co. Chartered Accountants Firm Registration No. 002465N
| ||(Simmi Jain) |
|Place: New Delhi ||Partner |
|Date: 28th July 2020 ||Membership No.086496 |
|UDIN-20086496AAAACK8472 || |
Annexure A to the Independent Auditor's Report on the Consolidated Financial Statementto the members of SBEC Sugar Limited dated March 31 2020.
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act") as referred to in paragraph 2(f) ofReport on Other Legal and Regulatory Requirements' section
In conjunction with our audit of the consolidated financial statement of SBEC SugarLimited as of March 31 2020. We have audited the internal financial controls overfinancial reporting of SBEC Sugar Limited (hereinafter referred to as the "HoldingCompany") and two subsidiaries (the Holding Company and its subsidiaries togetherreferred to as "the Group") incorporated in India as of the date.
Management's Responsibility for Internal Financial Controls
The respective Board of Directors of the Holding Company and subsidiary companies whichare incorporated in India are responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by theCompany considering the essential components of internal control statedin the "Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India". 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 the respective company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information 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 accordance with the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting (the "Guidance Note") and theStandards on Auditing issued by ICAI and deemed to be prescribed under section 143(10) ofthe Companies Act 2013 to the extent applicable to an audit of internal financialcontrols both applicable to an audit of Internal Financial Controls and both issued bythe Institute of Chartered Accountants of India. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting was established and maintained and if such controls operated effectively in allmaterial 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 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 thatthe audit evidence we have obtained and the audit evidence obtained by the other auditorsin terms of their reports referred to in the Other Matters paragraph below is sufficientand appropriate to provide a basis for our audit opinion on the Company's internalfinancial controls system 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 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:
a) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
b) 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
c) 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 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 Holding Company and two subsidiary companies which are companiesincorporated in India have maintained 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 2020 based on"the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India"
Our aforesaid reports under Section 143(3)(i) of the Act on the adequacy and operatingeffectiveness of the internal financial controls over financial reporting insofar as itrelates to twosubsidiaries which are companies incorporated in India is based on thecorresponding reports of the auditors of such companies.
Place: New Delhi Date:28th May 2020
For K. K. Jain & Co. Chartered Accountants Firm Registration No. 002465N
Sd/-(Simmi Jain) Partner Membership No.086496