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Shankara Building Products Ltd.

BSE: 540425 Sector: Others
NSE: SHANKARA ISIN Code: INE274V01019
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OPEN 218.00
PREVIOUS CLOSE 221.05
VOLUME 1829
52-Week high 583.00
52-Week low 214.60
P/E 23.19
Mkt Cap.(Rs cr) 504
Buy Price 220.75
Buy Qty 50.00
Sell Price 227.00
Sell Qty 10.00
OPEN 218.00
CLOSE 221.05
VOLUME 1829
52-Week high 583.00
52-Week low 214.60
P/E 23.19
Mkt Cap.(Rs cr) 504
Buy Price 220.75
Buy Qty 50.00
Sell Price 227.00
Sell Qty 10.00

Shankara Building Products Ltd. (SHANKARA) - Auditors Report

Company auditors report

To The Members of Shankara Building Products Limited

Report on The Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying Standalone Ind AS financial statements of ShankaraBuilding Products Limited ("the Company") which comprise the Balance Sheet asat March 31 2019 the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Changes in Equity and the Statement of Cash Flows for the yearthen ended and notes to the Standalone Ind AS financial statements including a summary ofsignificant accounting policies and other explanatory information (hereinafter referred toas "Standalone Ind AS Financial Statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India including the Indian Accounting Standards ("Ind AS") of the state ofaffairs of the Company as at March 31 2019 its profit including other comprehensiveincome changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with Standards on Auditing (SAs) specified undersection 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone Ind ASFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia ("ICAI") together with the ethical requirements that are relevant to ouraudit of the Standalone Ind AS financial statements under the provisions of the Act andRules there under and we have fulfilled our other ethical responsibilities in accordancewith these requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Ind AS financial statements of the currentperiod. These matters were addressed in the context of our audit of the Standalone Ind ASfinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matter described below to bethe key audit matter to be communicated in our report:

1. Discount from supplier

Description of Key audit matter

The company avails discount from its suppliers which are either based on MoU with thesupplier ('MoU based discounts') or oral negotiations with the supplier consideringprevailing steel prices ('Non-MoU based discounts'). The calculation of discount isdependent on an estimation of whether amounts due as discount receivable have been earnedat the balance sheet date. In relation to calculation of Non-MoU based discountsignificant judgment is involved with respect to the realization of discount in theabsence of any formal agreement/correspondence. We focused on this area since suchdiscounts represent a material reduction in cost of materials consumed.

Description of Auditor's Response We have performed the following procedures:

• Comparative analysis of movement of discount receivable during current year withthat of previous year

• Tested the accuracy of calculation of discount receivable by verifying inventorypurchased from invoicing done by the supplier during the year and in case of MoU baseddiscount tested the rate of discount from MoU and in case of Non-MoU based discount weconfirmed its reasonableness by comparing rate of discount availed with invoice rate

• Verified credit notes on sample basis issued by the supplier for discountspreviously recognized that provides an empirical evidence for the realization of discounts

• Review of ageing analysis of discount receivable at year end and discussion withmanagement regarding the realization of discount receivable

2. Inventory Existence and Valuation

Description of Key audit Matter

Inventory is held in various locations by the Group. There are complexities and manualprocess involved in determining inventory quantities on hand and valuation of the same dueto the diverse & numerous inventory products multiple storage locations and pricefluctuations of products. Accordingly inventory quantities and valuation is identified asa key audit Matter.

Description of Auditor's Response

We have performed the following procedures:

• We have attended inventory counts at certain locations which we selected basedon financial significance and risk observed management's inventory count procedures toassess the effectiveness selected a sample of inventory products and compared thequantities counted to the quantities recorded and ensured inventory adjustments if anyare recorded in the books of accounts.

• Reviewed the internal audit report regarding physical verification ofinventories and traced adjustments on sample basis made on basis of such report to thebooks of accounts.

• Comparative analysis of inventory as at the end of the year with the inventoryat the beginning of the year.

• we assessed whether the management's controls relating to inventory's valuationare appropriately designed and implemented.

• Verification of the correctness of valuation made by the management on a samplebasis with regard to the cost and net realizable value of inventory.

Information Other than the Standalone Ind AS Financial Statements and Auditor's ReportThereon

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 Shareholder's Information but does notinclude the standalone Ind AS financial statements and our auditor's report thereon.

Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone Ind AS financialstatements or our knowledge obtained during the course of our audit or otherwise appearsto 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.

Responsibilities of Management and Those Charged with Governance for the Standalone IndAS Financial 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 Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including Ind ASspecified under section 133 of the Act read with relevant rules issued there under. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the Standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

Board of Directors is also responsible for overseeing the Company's financial reportingprocess.

Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Ind ASfinancial 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 this Standalone Ind AS financial statements. As part of an audit inaccordance with SAs we exercise professional judgment and maintain professionalskepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143 (3)(i) of the Act we are also responsible for expressing our opinion on whether the companyhas adequate internal financial controls with reference to financial statements in placeand the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting 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 Standalone Ind AS financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.

• Evaluate the overall presentation structure and content of the Standalone IndAS financial statements including the disclosures and whether the Standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.

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 Ind AS financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

(1) As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of section 143(11) of the Act we givein "Annexure 1" a statement on the matters specified in paragraphs 3 and 4 ofthe Order to the extent applicable.

(2) 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) the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis report are in agreement with the books of account;

d. In our opinion the aforesaid Standalone Ind AS financial statements comply with theIndian Accounting Standards specified under section 133 of the Act read with relevantrules issued there under;

e. On the basis of the written representations received from the directors as on March31 2019 and taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2019 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 with reference tofinancial statements of the Company and the operating effectiveness of such controls wegive our separate report in "Annexure 2".

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 / provided by the Company to its directors during theyear is in accordance with 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) The Company has disclosed the impact of pending litigations on its financialposition in its Standalone Ind AS financial statements - Refer Note 36 on ContingentLiabilities to the Standalone Ind AS financial statements;

(ii) The Company did not have any long-term contracts including derivative contracts.Hence the question of any material foreseeable losses does not arise;

(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

For Haribhakti & Co. LLP

Chartered Accountants

ICAI Firm Registration No.103523W / W100048

Gaurav Poddar

Partner

Membership No.063847

Bengaluru

May 09 2019

ANNEXURE 1

TO THE INDEPENDENT

AUDITOR'S REPORT

[Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements'in the Independent Auditor's Report of even date to the members of Shankara BuildingProducts Limited on the Standalone Ind AS financial statements for the year ended March31 2019]

(i)

(a) The Company is in the process of updating its fixed asset register showing fullparticulars including quantitative details and situation of fixed assets.

(b) During the year fixed assets of the company have been physically verified by themanagement and as informed no material discrepancies were noticed on such verification Inour opinion the frequency of verification is reasonable having regard to the size of thecompany and the nature if its assets.

(c) The title deeds of immovable properties recorded as fixed assets in the books ofaccount of the Company are held in the name of the Company.

(ii) The inventory has been physically verified by the management during the year. Inour opinion the frequency of verification is reasonable. As informed no materialdiscrepancies were noticed on physical verification carried out during the year.

(iii) As informed the Company has not granted any loans secured or unsecured tocompanies firms Limited Liability Partnerships or other parties covered in the registermaintained under section 189 of the Act. Accordingly paragraph 3

(iii)(a) 3 (iii)(b) and 3 (iii)(c) of the Order are not applicable to the Company.

(iv) Based on information and explanation given to us in respect of loans investmentsguarantees and securities the company has complied with the provisions of section 185 and186 of the Act.

(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public within the provisions of sections 73to 76 of the Act and the rules framed there under.

(vi) The Central Government has not prescribed the maintenance of cost records for anyof the products of the company under sub-section (1) of section 148 of the Act and therules framed there under.

(vii) (a) The Company is generally regular in depositing with appropriate authoritiesundisputed statutory dues including provident fu n d employees' state insurance goodsand service tax income tax customs duty cess and any other material statutory duesapplicable to itthough there have been slight delays in few cases.

According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income tax sales taxservice tax value added tax goods and service tax customs duty excise duty cess andany other material statutory dues applicable to it were outstanding at the year end fora period of more than six months from the date they became payable.

(b) According to the information and explanation given to us the dues outstanding withrespect to income tax sales tax service tax value added tax goods and service taxcustoms duty excise duty on account of any dispute are as follows:

Name of the statute Nature of dues Amount Period to which the amount relates Forumwhere dispute is pending
Income tax Act 1961 Income tax 3620030* AY 2008-09 High Court

(viii) According to the information and explanations given to us the Company has notdefaulted in repayment of loans or borrowings to banks. The Company did not have anyoutstanding loans or borrowings from financial institution government or dues todebenture holder during the year.

(ix) The Company has not raised money by way of public issue offer and hence thequestion of utilization of money raised by way of initial public offer does not arise. Inour opinion and according to the information and explanations given to us the Company hasutilized the term loans for the purposes for which they were obtained.

(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 we have neither come across anyinstance of fraud by the Company or any fraud on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such instance by themanagement.

(xi) According to the information and explanations given to us managerial remunerationhas been paid / provided in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Act.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Therefore paragraph 3(xii) of the Order is not applicableto the Company.

(xiii) According to the information and explanation given to us all transactionsentered into by the Company with the related parties are in compliance with sections 177and 188 of Act where applicable and the details have been disclosed in the Standalone IndAS Financial Statements etc. as required by the applicable accounting standards.

(xiv) The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review. Thereforeparagraph 3

(xiv) of the Order is not applicable to the Company.

(xv) According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with him duringthe year.

(xvi) According to the information and explanation given to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.

For Haribhakti & Co. LLP

Chartered Accountants

ICAI Firm Registration No. 103523W / W100048

Gaurav Poddar

Partner

Membership No.063847

Bengaluru

May 09 2019

ANNEXURE 2

TO THE INDEPENDENT

AUDITOR'S REPORT

[Referred to in paragraph 2 under 'Report on Other Legal and Regulatory Requirements'in the Independent Auditor's Report of even date to the members of Shankara BuildingProducts Limited on the Standalone Ind AS financial statements for the year ended March31 2019]

Report on the Internal Financial Controls with reference to Financial Statements underclause (i) of sub-section 3 of section 143 of the Companies Act 2013 ("theAct")

We have audited the internal financial controls with reference to financial statementsof Shankara Building Products Limited ("the Company") as of March 31 2019 inconjunction with our audit of the Standalone Ind AS financial statements of the Companyfor 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 with reference to financial statementscriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India ("ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

Auditors' 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 and the Standards on Auditing specified under section143(10) of the Act to the extent applicable to an audit of internal financial controlsboth issued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements 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 with reference to financial statements and their operatingeffectiveness.

Our audit of internal financial controls with reference to financial statementsincluded obtaining an understanding of internal financial controls with reference tofinancial statements assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal controls based on theassessed risk. The procedures selected depend on the auditor's judgement 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 control 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) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls with reference to FinanciaStatements

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 controls 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 March 312019 based on the internal control with reference to financial statements criteriaestablished by the Company considering the essential components of internal controlsstated in the Guidance Note issued by the ICAI.

For Haribhakti & Co. LLP

Chartered Accountants

ICAI Firm Registration No.103523W / W100048

Gaurav Poddar

Partner

Membership No.063847

Bengaluru

May 09 2019