To the members of Sheela Foam Limited' on Standalone Financial Statements
We have audited the accompanying standalone financial statements of Sheela Foam Limited(the "Company") which comprise the Standalone Balance Sheet as at 31 March2020 and the Standalone Statement of Profit and Loss (including Other ComprehensiveIncome) the Standalone Statement of Changes in Equity and the Standalone Statement ofCash Flows for the year then ended and notes to the standalone financial statementsincluding a summary of the significant accounting policies and other explanatoryinformation.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the informationrequiredbytheCompaniesAct2013(theAct')inthemanner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2020 and total Comprehensive Income itschanges in equity and its cash flows for the year ended on that date.
BASIS FOR OPINION
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's
Responsibilities for the Audit of the Financial Statements section of our report. Weare independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India together with the ethical requirements thatare relevant to our audit of the standalone financial statements under the provisions ofthe Act and the Rules thereunder and we have fulfilled our other ethical responsibilitiesin accordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.
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 year.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Key Audit Matters Useful lives of Property Plant & Equipment ||Auditor's Response Our Audit Procedure : |
|(Refer to Notes 3 and 5 to the standalone financial statements) ||We obtained and evaluated the management's estimations and specifically performed the work as under: |
|The property plant and equipment are depreciated on a pro-rata basis on written down value over the useful lives of the assets as estimated by the management. ||Compared the key assumptions used within the impairments models to the historic performance of the respective group of assets and approved estimates. |
|These estimations are based on changes in the expected level of usage technological developments level of wear and tear which involves high degree of the estimation and judgement and could affect the reported residual value and depreciation of the assets. As the value of property plant and equipment is substantial i.e. Rs. 29285 lakhs which is 25.04% of the total assets of the Company therefore any change in these estimates or actual results could have a substantial impact on the profit/ assets in future years and completeness and accuracy of the financial statements. ||Benchmarking the key assumptions used with in the impairment models and past history of the replacement age etc. and repairs requirements / cost etc. |
| ||Our Results: |
| ||As a result of performance of above procedures we have not identified any circumstances that would lead to material adjustments to the carrying value of these assets or change in their useful lives. |
|Fair Value measurement of Financial Instruments ||Our Audit Procedure : |
|(Refer to Note 40.11 to the standalone financial statements) ||The Company has carried out the valuation of the financial instruments after applying judgments and estimates. We have conducted the verification of the data provided to us by the Company with respect to its correctness and completeness vis--vis the financial accounts / records of the Company and held interaction with the management to understand their process and results and the implementation and usage of valuation techniques / models. This included the review of the controls over adjustments to mitigate model limitations and assumptions. |
|Fair value of financial assets and financial liabilities have been measured using valuation techniques where the financial instruments are not quoted in active market. The inputs to these techniques / models are taken from observable markets where possible but where this is not feasible a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk credit risk and volatility which involve high degree of the estimation and judgement and could affect the reported fair value of financial instruments. || |
| ||Our Results: |
| ||The results of our testing were satisfactory and we considered the fair value of the financial instruments assets and liabilities recognised to be acceptable. |
|Interest in Foreign Subsidiaries ||Our Audit Procedure : |
|(Refer to Notes 6 and 40.16.a to the standalone financial statements) ||Understanding of the assessment of the key drivers of the cash flow forecasts including discount rates expected growth rates and terminal growth rates used to estimate the future business volume and receipts of these Subsidiaries. |
|Global pandemic COVID-19 continues to wreak havoc to the global economy disrupting business throughout the World and many companies are grappling with the economic slowdown thus the prevalent financial economic and health crisis caused due to COVID-19 may impact the Company's assumptions used for the business operations of its foreign subsidiaries located in Spain and Australia which could further have the impact on the assessment of impairment of investment and ||Evaluation of the inputs and assumptions used in the impairment of the assets and management's assessment for the future operations considering the impact of COVID-19 by using current indicators of future economic conditions. |
|exposure of Rs. 37277 lakhs in these foreign subsidiaries (equity investment of Rs. 13660 lakhs unsecured loans of Rs. 4638 lakhs given to the foreign subsidiaries and SBLCs / financial guarantees of Rs. 18979 given to the bank towards guarantee of the loans taken by the subsidiaries). ||Review of the considerations and conclusion of the independent auditors of Subsidiaries regarding its ability to continue as going concerns and obtaining of the further information and explanations from them in this regard. |
| ||Our Results: |
|As the said investment / exposure is equivalent to 31.87% of the total assets of the Company therefore any change in the business projections / estimates and actual results could have a substantial impact on the profit / assets in future year/s and the completeness and accuracy of the financial statements. ||The results of our testing were satisfactory and we considered the carrying amount of the investment and loans to foreign subsidiaries and also the assumption that there will be no liability against the SBLCs / financial guarantees issued in their favour to be acceptable. |
I N FORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS AND AUDITOR'S REPORTTHEREON
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the Corporate Governance Report and Directors' Report includingannexures thereon but does not include the standalone financial statements and ourauditor's report thereon.
Our opinion on the standalone 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 financial statements our responsibilityis to read the other information identified above and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated.
If based on the work we have performed on the other information we conclude thatthere is a material misstatement of this other information we are required to report thatfact. We have nothing to report in this regard.
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 includingother comprehensive income changes in equity and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards ("Ind AS") notified under Section 133 of the Act read withthe Companies (Indian Accounting Standards) Rules 2015 as amended from time to time.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the standalone financial statements the Board of Directors is responsiblefor assessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless the Board of Directors either intends to liquidate the Company or tocease operations or has no realistic alternative but to do so.
Those 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:
- Identifyandassesstherisksofmaterialmisstatement 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 control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theCompanies Act 2013 we are also responsible for expressing our opinion on whether thecompany has adequate internal financial controls system in place and the operatingeffectiveness 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 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 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 themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure 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 the Companies (Auditor's Report) Order 2016' ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofSection 143 of the Act we give in the Annexure-A' a statement on thematters specified in paragraph 3 and 4 of the Order.
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 appears from our examination of those books.
c. the Standalone Balance Sheet the Standalone Statement of Profit and Loss (includingOther Comprehensive Income) Standalone Statement of Changes in Equity and the StandaloneStatement of Cash Flows dealt with by this Report are in agreement with the books ofaccount.
d. in our opinion the aforesaid standalone financial statements comply with the IndianAccounting Standards ("Ind AS") notified under Section 133 of the Act read withthe Companies (Indian Accounting Standards) Rules 2015 as amended from time to time.
e. on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2020 from being appointed as a director in terms of Section 164 (2) of the Act.
f. with respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate report in
g. In our opinion the remuneration paid by the Company to its Directors is inaccordance with the provisions of Section 197 of the Companies Act 2013; and
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 financial statements Refer Note 40.1 to the standalonefinancial statements;
ii. The Company has not entered into any long-term contracts including derivativecontracts.
iii. There has been no amount required to be transferred to the Investor Educationand Protection Fund by the Company.
Annexure-A' to the Independent Auditors' Report
(Referred to in paragraph 1 under Rs.Report on Other Legal and Regulatory Requirements'section of the independent auditors' report of even date on the standalone financialstatements of Sheela Foam Limited for the year ended 31 March 2020)
(i) In respect of its property plant and equipments; a. The Company has maintainedproper records showing full particulars including quantitative details and situation ofthe property plant and equipments.
b. As explained to us the property plant and equipments are physically verified bythe management at reasonable intervals which in our opinion is reasonable having regardto the size of the Company and nature of its property plant and equipments. No materialdiscrepancies were noticed on such physical verification.
c. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties asdisclosed in Note 3 on property plant and equipments and Note 5 on investment property tothe standalone financial statements are held in the name of the Company.
(ii) As explained to us inventories have been physically verified by the management atregular intervals during the year. The discrepancies noticed on such physical verificationas compared to book records were not material and have been appropriately dealt with inthe books of accounts.
(iii) According to the information and explainations given to us the Company hasgranted unsecured loan to a Subsidiary Company covered in the Register maintained underSection 189 of the Companies Act 2013 in respect of which we report that:
a. The terms and conditions of grant of the said unsecured loan in our opinion primafacie are not prejudicial to the interest of the Company.
b. The schedule of repayment of principal and payment of interest has been stipulatedas per which the repayment of principal and interest has not yet fallen due.
c. As the repayment of principal and interest has not yet started the said clauseregarding the overdue outstanding is not applicable.
(iv) In our opinion and according to the information and explanations given to us theCompany in respect of loans investments guarantees and security has complied with theprovisions of section 185 and 186 of the Act.
(v) The Company has not accepted any deposits from the public within the meanings ofSections 73 to 76 of the Act and the rules framed thereunder to the extent notified.
(vi) Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under subsection (1) of Section 148 of theAct in respect of its products. We have broadly reviewed the same 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 cost records with a view to determinewhether they are accurate or complete.
(vii) In respect of statutory dues: a. According to the information and explanationsgiven to us and the records of the Company examined by us in our opinion the Company isgenerally regular in depositing undisputed statutory dues including Provident FundEmployees' State Insurance Income Tax Goods and Service Tax Duty of Customs Cess andother statutory dues as applicable with the appropriate authorities. According to theinformation and explanations given to us no undisputed amounts payable in respect of theaforesaid dues were outstanding as at 31 March 2020 for a period of more than six monthsfrom the date they became payable.
b. The disputed statutory dues aggregating to Rs. 1301.65 lakhs that have not beendeposited on account of matters pending in appeals before appropriate authorities are asunder:
Name of the Statute Nature of the dues Amount Period to which the Forum where (Rs.in lakhs) amount relates dispute is pending
Central Excise Act Excise duty 217.14 2011-16 Central Excise and Service Tax 1944Appellate Tribunal 14.79 2012-13 The Commissioner (Appeal) Central Excise and Service TaxCentral Sales Tax Sales Tax 319.00 1999-2000 The Hon'ble High Court and Sales Tax Act of128.98 2012-13 Sales Tax Appellate Tribunal various states West Bengal Entry Tax 28.872012-14 The Hon'ble Supreme Court 28.86 2001-12 The Hon'ble High Court Goods and CGST 2.292018-19 UP Goods & Service Tax Service Tax Department Income Tax Act 1961 Income Tax8.45 2004-05 The Commissioner of Income Tax (Appeals) 553.27 2005-14 Income Tax AppellateTribunal
(viii) Based on the audit procedures and according to the information and explanationsgiven to us the Company has not defaulted in repayment of loans or borrowings tofinancial institution banks and Government.
(ix) The Company has not raised money by way of initial public offer or further publicoffer (including debt instruments) and term loans during the year.
(x) In our opinion and according to the information and explanations given to us nofraud by the Company or fraud on the Company by its officers / employees has been noticedor reported during the course of our audit.
(xi) The managerial remuneration paid / provided is within the limit and in complianceof the provisions of section 197 read with Schedule V to the Act.
(xii) The Company is not a Nidhi Company hence the requirement of this clause is notapplicable.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with section 177 and 188 of the Act where applicable. The details of suchtranscations have been disclosed in the standalone financial statements as required bythe Ind AS 24 Related Party Disclosures.
(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
(xv) In our opinion and according to the information and explanations given to us theCompany has not entered into any non-cash transactions with Directors or persons connectedwith them.
(xvi) As explained to us the Company is not required to be registered under section45-IA of the Reserve Bank of India Act 1934.
Place: Noida Date : 26 June 2020
For S.P. CHOPRA & CO.
Chartered Accountants Firm Regn. No. 000346N
Partner M. No. 083364
Annexure-B' To The Independent Auditors' Report
(Referred to in paragraph 2(f) under Rs.Report on Other Legal and RegulatoryRequirements' section of the independent auditors' report of even date on the StandaloneFinancial Statements of Sheela Foam Limited for the year ended 31 March 2020)
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 SheelaFoam Limited ("the Company") as of 31 March 2020 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 Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the "Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting" (the "Guidance Note") issued by the Institute ofChartered Accountants of India ("ICAI"). These responsibilities include thedesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe 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 the Institute ofChartered Accountants of India and deemed to be prescribed under section 143(10) of theAct to the extent applicable to an audit of internal financial controls both applicableto an audit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. 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 over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors' judgement including the assessment of the risks ofmaterial misstatement 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 ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the Company are being made only in accordance with authorisations ofmanagement and Directors of the Company; and (3) 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.
I NHERENT 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 to the best of our information and according to the explanations givento us the Company has in all material respects adequate internal financial controlswith reference to financial statements and such internal financial controls with referenceto financial statements were operating effectively as at
31 March 2020 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.
Place: Noida Date : 26 June 2020
For S.P. CHOPRA & CO.
Chartered Accountants Firm Regn. No. 000346N
Partner M. No. 083364