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Shilpa Medicare Ltd.

BSE: 530549 Sector: Health care
NSE: SHILPAMED ISIN Code: INE790G01031
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VOLUME 12578
52-Week high 670.95
52-Week low 317.05
P/E 45.96
Mkt Cap.(Rs cr) 4,867
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 565.00
CLOSE 562.55
VOLUME 12578
52-Week high 670.95
52-Week low 317.05
P/E 45.96
Mkt Cap.(Rs cr) 4,867
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Shilpa Medicare Ltd. (SHILPAMED) - Auditors Report

Company auditors report

To the Members of SHILPA MEDICARE LIMITED

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of SHILPAMEDICARE LIMITED ("the company") which comprise the Balance Sheet as atMarch 31 2020 the Statement of Profit and Loss (including other comprehensive income)the Statement of Changes in Equity and the Statement of Cash Flows for the year ended onthat date and notes to the financial statements including a summary of the significantaccounting policies and other explanatory information (herein after referred to as"the financial statements")

In our opinion and to the best of our information and according to theexplanations given to us the accompanying standalone 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 AccountingStandard) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020the profit and total comprehensive income changes in equity and its cash flows for theyear ended on that date.

Basis for Opinion

We conducted our audit of the financial statements in accordance withthe Standards on Auditing (SAs) specified under Section 143(10) of the Act. Ourresponsibilities under those standards are further described in the Auditorsresponsibility for the Audit of Financial Statements section of our report. We areindependent of the company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India (ICAI) together with the ethical requirements that arerelevant to our audit of financial statements under the provisions of the Act and theRules made thereunder and we have fulfilled our other ethical responsibilities inaccordance 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 our auditopinion on the financial statements.

Key Audit Matters

Key Audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate 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 Auditor's Response
Group restructuring and discontinued operations Principal audit procedures
As disclosed in note note-49 to the standalone financial statements during the year following approval by shareholders on 30th March at an Extraordinary General Meeting (EGM) the Company completed the sale of Biologics business to its wholly owned subsidiary Shilpa Biologics Private Limited. • We read the minutes of meetings of Board of directors and Shareholders Extraordinary General Meeting and evaluation of the terms and conditions with respect to the business sale and related agreements.
• Our Audit procedure included evaluation of the disposal date balances and assessing the gain on disposal.
The application of Ind AS 105: Non-Current Assets Held for sale and Discontinued Operations" is significant to our audit because of the significance of amount the transaction and accounting is non-routine and complexities involved in carving out the results of the respective businesses. • We obtained the Company's evaluation of the income-tax impact of the above business transfers (from a seller's perspective) to verify compliance.
• Assessing the adequacy of the disclosures in note 49 to the standalone financial statements in accordance with the requirements of Ind AS 105: Non-Current Assets Held for sale and Discontinued Operations.
In accordance with the accounting principles the company has reclassified the revenue expenses tax and gain/loss on disposal arising from these businesses as discontinued operations for current and previous year.
Impairment of Investment in Subsidiaries Associates and Joint Ventures Principal audit procedures
Our audit procedures include the following substantive procedures:
As at March 31 2020 the carrying amount of investment in investments in subsidiaries associates and joint ventures is Rs 4067.66 Lakhs. Further the Company has also invested in preference share capital of the Subsidiaries the carrying amount of which as at March 312020 is Rs 5176.77 Lakhs. • Obtained an understanding of management's process and evaluated design and tested operating effectiveness of controls around identification of indicators of impairment under Ind AS and around valuation of the business to determine recoverable value of the said investment.
The carrying value of investment in subsidiaries associates and joint ventures will be recovered through future cash flows and there is inherent risk that these assets will be impaired if these cash flows do not meet the Company's expectations. • Assessed the appropriateness of methodology and valuation model used by the management to estimate the recoverable value of investments.
• Assessed cash flow forecasts to ensure consistency with current operations of the Company and performed sensitivity analysis on key assumptions used in management's calculated recoverable value
Refer to note 1.1 (q) in the Standalone Financial Statements for details of accounting policies on impairment of assets and related disclosures.
• Assessed the reasonableness of assumptions relating to revenue growth rate gross margins discount rates etc. based on historical results current developments and future plans of the business estimated by management using expertise of our valuation specialist on required parameters.
Valuation of investment in subsidiaries associates and joint ventures is a key audit matter due to:
• The inherent complexity in auditing the forward looking assumptions applied to recoverable value given the significant judgements involved. The key assumptions in the cash flow models include the forecast revenue margins terminal growth and discount rates.
• Performed sensitivity analysis of the key assumptions including future revenue growth rates future gross margins and the discount rate applied in the recoverable value and considering the resulting impact on the impairment testing and whether selection of these key assumptions is appropriate.
• Based on our procedures we also considered the adequacy of disclosures in respect of investment in the said joint venture in the notes to the standalone financial statements.
Entitlement - Deferred tax assets In respect of such deferred tax assets we assessed recoverability from a tax perspective by performing the following procedures:
The Company pays minimum alternate tax (MAT) under section 115JB of the Income Tax Act 1961. The MAT paid would be available as an offset over a period of 15 years. The MAT credit is recognized as a deferred tax asset to be available for offset when the Company pays taxes under the provision of Income Tax Act 1961. The balance of MAT credit receivable as at March 31 2020 is Rs 4263.78 Lakhs (refer note 17 to the standalone financial statements). • Understanding why the MAT credit entitlement arose and understanding whether the MAT credit entitlement can be utilized.
• assessing any restriction in use of the MAT credit entitlement and
• determining when the MAT credit entitlement will expire.
The recognition and recoverability of deferred tax asset on account of MAT credit requires significant judgement regarding the Company's future profitability and taxable income which will result in utilization of the MAT credit within the time limits available under the applicable Income tax laws. Further we assessed the applicability of Ind AS 12 Income Taxes by assessing management's assessment of recoverability of MAT credit entitlement against forecast income streams including reliability of future income projections.
We validated the appropriateness of the related disclosures in the standalone financial statements.

Other information

The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the AnnualReport but does not include the standalone financial statements and our auditor's reportthereon.

Our opinion on the Standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the Standalone financial statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially misstated. If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters statedin Section 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of these standalone financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in equity of the Company in accordance with the Indian Accounting Standards(Ind AS) prescribed under Section 133 of the Act read with relevant rules issued thereunder and other accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of thecompany and for preventing and detecting the frauds and other irregularities; selectionand application of appropriate accounting policies; making judgments and estimates thatare reasonable and prudent; and design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofstandalone financial 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 ofDirectors is responsible for assessing the company's ability to continue as a goingconcern disclosing as applicable matters related to going concern and using the goingconcern basis of accounting unless the Board of Directors either intends to liquidate thecompany or to cease operations or has no realistic alternative but to do so.

The Board of Directors are responsible for overseeing the Company'sfinancial reporting process.

Auditor's Responsibility for the Audit of the Standalone FinancialStatements

Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

• Obtain an understanding of internal financial controls relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Act we are also responsible for expressingour opinion on whether the Company has adequate internal financial controls system inplace and the operating effectiveness of such controls.

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

• Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate 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 to cease to continue as a going concern.

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

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would 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) Order2016("the Order") issued by the Central Government of India in terms of sub-section(11) of section 143 of the Act we give in the Annexure A a statement on the mattersspecified in the paragraph 3 and 4 of the Order to the extent applicable.

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

a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit

b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books

c) The Standalone Balance Sheet the Standalone Statement of Profit andLoss including Other Comprehensive Income Standalone Statement of Changes in Equity andthe Standalone Cash Flow Statement dealt with by this Report are in agreement with thebooks of account

d) In our opinion the aforesaid financial statements comply with theIndian Accounting Standards (Ind AS) prescribed under Section 133 of the Act.

e) On the basis of written representations received from the directorsas on March 312020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 312020 from being appointed as a director in terms of Section164(2) of the Act

f) With respect to the adequacy of internal financial controls overfinancial reporting of the Company with reference to these financial statements and theoperating effectiveness of such controls refer to our separate report in "AnnexureB".

g) In our opinion the managerial remuneration for the year ended March31 2020 has been paid / provided by the Company to its directors in accordance with theprovisions of section 197 read with Schedule V to the Act;

h) With respect to the other matters to be included in the Auditor'sreport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements.

ii. The Company has made provision as required under the applicablelaw or accounting standards for material foreseeable losses if any on long-termcontracts 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 BRAHMAYYA & CO.
Chartered Accountants
Firm's Regn No. 000513S
(K.SHRAVAN)
Partner
Membership No. 215798
UDIN: 20215798AAAACD2517
Place : Hyderabad
Date : 15.06.2020

Annexure - A to the Auditor's Report

The Annexure referred to in Para 1 under the heading of "Report onOther Legal and Regulatory Requirements" of our report of even date to the membersof SHILPA

MEDICARE LIMITED for the year ended March 312020.

1. a. The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.

b. As explained to us the management has physically verified the fixedassets during the year and there is a regular programme of physical verification which inour opinion is reasonable having regard to the size of the Company and the nature of theassets. No discrepancies were noticed on such verification.

c. According to the information and explanation given to us and on thebasis of our examination of the records of the Company the title deeds of immovableproperties are held in the names of the Company.

2. As explained to us the inventories have been physically verified bythe management at reasonable intervals during the year. In our opinion the frequency ofverification is reasonable. The discrepancies noticed on physical verification between thephysical stocks and book records were not material.

3. According to the information and explanation given to us theCompany has granted unsecured loans to companies covered in the register maintained undersection 189 of the Companies Act 2013 ('the Act').

a. The terms and conditions of such loans granted are not prejudicialto the interest of the Company.

b. The schedule of repayment of principal and payment of interest hasbeen stipulated in the agreement and repayments or receipts of principal amounts andinterest have been made as per stipulations.

c. There were no overdue amounts in respect of the loan granted to aCompany covered in the register maintained under section 189 of the Act.

4. In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of section 185 and

186 of the Act with respect to the loans and investments made.

5. The Company has not accepted any deposits from the public. Hence theprovisions of Sections 73 to 76 or any other relevant provisions of the Companies Act2013 and the rules framed there under do not apply to this Company.

6. We have broadly reviewed the cost records maintained by the Companypursuant to subsection (1) of section 148 of the Companies Act 2013 and are of theopinion that prime facie the prescribed accounts and records have been made andmaintained. We have however not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.

7. a. According to the records the company is regular in depositingundisputed statutory dues including provident fund employees 'state insuranceIncome-tax Sales-tax Service tax Goods and Services Tax Duty of customs Duty ofexcise Value added tax Cess and all other statutory dues with the appropriateauthorities and there are no arrears of outstanding statutory dues as at March 31 2020for a period more than six months from the date they became payable.

b. According to the records of the Company and the information andexplanations given to us there were no dues of income tax or sales tax or service tax orduty of customs or duty of excise or value added tax have not been deposited on account ofany dispute.

8. In our opinion and according to the information and explanationsgiven to us the Company has not defaulted in repayment of dues to any financialinstitutions and Banks during the year.

9. During the year under review the company has not raised any moneysby way of initial public offer or further public offer (including debt instruments). TheTerm loans availed were applied for the purposes for which those are raised.

10. According to the information and explanations given to us nomaterial fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the course of our audit.

11. According to the information and explanations given to us and basedon our examination of the records of the Company the Company has paid/provided formanagerial remuneration in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Act.

12. In our opinion and according to the information and explanationsgiven to us the Company is not a Nidhi Company. Accordingly paragraph 3(xii) of theCompanies (Auditor's Report) Order 2016 is not applicable.

13. According to the information and explanations given to us and basedon our examination of the records of the Company transactions with related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.

14. According to the information and explanation given to us and basedon our examination of the records of the Company the Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year.

15. According to the information and explanations given to us and basedon our examination of the records of the Company the Company has not entered intonon-cash transactions with directors or persons connected with him. Accordingly paragraph3(xv) of the Companies (Auditor's Report) Order 2016 is not applicable.

16. The Company is not required to be registered under section 45-IA ofthe Reserve Bank of India Act 1934.

for BRAHMAYYA & CO.
Chartered Accountants
Firm's Regn No. 000513S
(K.SHRAVAN)
Partner
Membership No. 215798
UDIN: 20215798AAAACD2517
Place : Hyderabad
Date : 15.06.2020

Annexure - B to the Auditor's Report

Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financialreporting of SHILPA MEDICARE LIMITED ("the Company") as of March 312020 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 andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India ('ICAI').These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to 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 Act.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting with reference to these financial statementsbased on our audit. We conducted our audit in accordance with the Guidance Note on Auditof Internal Financial Controls over Financial Reporting (the "Guidance Note")and the Standards on Auditing to the extent applicable to an audit of internal financialcontrols and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting with reference to these financial statementswas established and maintained and if such controls operated effectively in all materialaspects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting withreference to these financial statements and their operating effectiveness. Our audit ofinternal financial controls over financial reporting included obtaining an understandingof internal financial controls over financial reporting with reference to these financialstatements assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the financial statements whether due to fraud anderror.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting withreference to these financial statements is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally acceptedaccounting principles. A company's internal financial control over financial reportingwith reference to these financial statements includes those policies and procedures that:(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditure of the Company are being made only in accordance withauthorisations of management and directors of the Company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the Company's assets that could have a material effect on the financialstatements.

Inherent Limitations of Internal Financial Controls Over FinancialReporting

Because of the inherent limitations of internal financial controls overfinancial reporting with reference to these financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these financial statements to future periods are subject to the risk that the internalfinancial control over financial reporting with reference to these financial statementsmay become inadequate because of changes in conditions or that the degree of compliancewith policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting with reference to thesefinancial statements and such internal financial controls over financial reporting withreference to these financial statements were operating effectively as at March 31 2020based 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.

for BRAHMAYYA & CO.
Chartered Accountants
Firm's Regn No. 000513S
(K.SHRAVAN)
Partner
Membership No. 215798
UDIN: 20215798AAAACD2517
Place : Hyderabad
Date : 15.06.2020

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