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Shilpa Medicare Ltd.

BSE: 530549 Sector: Health care
NSE: SHILPAMED ISIN Code: INE790G01031
BSE 00:00 | 23 Oct 468.00 -4.40
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NSE 00:00 | 23 Oct 468.25 -5.20
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OPEN 471.25
PREVIOUS CLOSE 472.40
VOLUME 8315
52-Week high 692.45
52-Week low 240.30
P/E 17.44
Mkt Cap.(Rs cr) 3,814
Buy Price 467.60
Buy Qty 10.00
Sell Price 470.00
Sell Qty 1.00
OPEN 471.25
CLOSE 472.40
VOLUME 8315
52-Week high 692.45
52-Week low 240.30
P/E 17.44
Mkt Cap.(Rs cr) 3,814
Buy Price 467.60
Buy Qty 10.00
Sell Price 470.00
Sell Qty 1.00

Shilpa Medicare Ltd. (SHILPAMED) - Auditors Report

Company auditors report

To

The Members

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 at 31March

2019 the Statement of Profit and Loss (including other comprehensiveincome) the Statement of Changes in Equity and the Statement of Cash Flows for the yearended on that date and a summaryofthesignificantaccounting policies and other explanatoryinformation (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 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 Indian Accounting Standards prescribedunder section 133 of the Act read with the Companies (Indian Accounting Standard) Rules2015 as amended ("Ind AS") and other accounting principles generally acceptedin India of the state of affairs of the Company as at 31 March 2019 the profit andtotal comprehensive income changes in equity and its cash flows for the year ended onthat 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 theAuditors responsibilityfor the Audit of Financial Statements section of our report. We are independent of thecompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (ICAI) together with the ethical requirements that are relevant toour audit of financial statements under the provisions of the Act and the Rules madethereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our audit opinion on thefinancial statements.

Key Audit Matters financial Key Audit matters are those mattersthat in our professional judgment were of most significance in our audit of thestandalone financial statements of the current period. These matters were addressed in thecontext of our audit of the standalone financial statements as a whole and in forming ouropinion thereon and we do not provide a separate opinion on these matters. We havedetermined the matters described below to be the key audit matters to be communicated inour report.

Key Audit Matters Auditor's Response
Impairment of Investment in Subsidiaries Associates and Joint Ventures Principal audit procedures
Our audit procedures include the following substantive procedures:
As at 31 March 2019 the carrying amount of investment in subsidiaries associates and joint ventures is र 4513.35 Lakhs.
Further the Company has also invested in preference share capital of the Subsidiaries the carrying amount of which as at 31 March 2019 is 4286.77 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 investment;
Refer to note 1.1 (q) in the Standalone Financial Statements for details of accounting policies on impairment of assets and related disclosures. 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
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. 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;
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 subsidiaries associates and joint ventures in the notes to the standalone financial statements.
Minimum Alternate Tax (MAT) Credit Entitlement – Deferred tax assets Principal audit procedures
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 31 March 2019 is र 4159.18 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
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. determining when the MAT credit entitlement will expire.
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.

Reasonableness of carrying amount of assets held for sale

The application of Ind AS 105 ‘Non-Current Asset Held for

Sale and Discontinued significantto our audit operations' isbecause the assessment of the classification is complex the transaction and itsaccounting is non-routine and involves significant management judgements that affectstiming presentation of the income statement and measurement of balance sheet items. Thesejudgments may have an effect on reported EBITDA for the continuing operations and other

Key Performance Indicators.

Assets held for sale are to be measured at lower of Carrying amount andfair value less cost to sell fair value have been estimated using significantunobservable inputs including non binding offers from and negotiations held withprospective buyers as a result of which fair value is sensitive to changes in inputassumptions.

Refer Note 1.1 (f) of Standalone Financial Statement.

Our audit included but was not limited to the following activities:

Read the sale agreements and assessed whether the classification was inaccordance with accounting standards.

Our audit procedures consisted of challenging management'sassumptions and expectation of outcome of negotiations with prospective buyers.

Assessed the valuation of the Non-Current Assets held for sale as thelower of the carrying amount and fair value less cost to sell the presentation of theassets in the financial statements and the date as of which is classified as held forsale.

Based on our Audit procedures we conclude that the assumptions andinputs have been appropriately considered in estimating the fair value.

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'sreport thereon.

statements does not cover the Our opinion on the financial otherinformation 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 inconsistentfinancialstatements or our with the 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.

Management's Responsibility for the Standalone financialStatements

The Company's Board of Directors is responsible for the mattersstated in Section 134(5) of the Companies Act 2013 ("the Act") with respect tothe preparation of these standalone financial statements that give a true andfairviewofthefinancialposition financial performance including other comprehensiveincome cash flows and changes in equity of the Company in accordance with the IndianAccounting Standards (Ind AS) prescribed under Section 133 of the Companies Act 2013 readwith relevant rules issued there under and other accounting principles generally acceptedin 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 financial statements the Board of Directors isresponsible for assessing the company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the Board of Directors either intends to liquidate the companyor to cease operations or has no realistic alternative but to do so.

The Board of Directors are responsible for overseeing the

Company's financial 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 relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection

143(3)(i) of the Act we are also responsible for expressing ouropinion on whether the Company has adequate internal financial controls system in placeand 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 conditionsmay cause the Company to cease to continue as a going concern.

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

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 wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our 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 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 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 mattersspecifiedin the paragraph 3 and 4 of the Order to the extent applicable.

2) As required by Section 143(3) of the Companies Act2013 we reportthat: a) We have sought and obtained all the information and explanations which to thebest of our knowledge and belief were necessary for the purposes of our audit b) In ouropinion proper books of account as required by law have been kept by the Company so faras it appears from our examination of those books c) the Balance Sheet the Statement ofProfit including Other Comprehensive Income Statement of Changes in Equity and the CashFlow Statement dealt with by this report are in agreement with the books of account d) Inour opinion the aforesaid financial comply with the Indian Accounting Standards (Ind AS)prescribed under Section 133 of the Companies Act 2013 read with Rule 7 of Companies(Accounts)

Rules 2014.

e) On the basis of written representations received from the directorsas on 31 March 2019 taken on record by the

Board of Directors none of the directors is disqualified as on 31March 2019 from being appointed as a director in terms of Section 164(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 31March 2019 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 theAuditor's report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 in our opinion and to the best of our information and according to theexplanations given to us:

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
Sd/-
(K.SHRAVAN)
Place : Hyderabad Partner
Date : 27 May 2019 Membership No. 215798

Annexure - A to the Auditor's Report

The Annexure referred to in Para 1 under the heading of

"Report on Other Legal and Regulatory Requirements" of ourreport of even date to the members of SHILPA MEDICARE LIMITED for the year ended31 March 2019.

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 theAct 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 sub-section (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 of excise Value added tax Cess and all otherstatutory dues with the appropriate authorities and there are no arrears of outstandingstatutory dues as at 31 March 2019 for a period more than six months from the date theybecame 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 the Companies (Auditor'sReport) 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 into non-cash transactions withdirectors or persons connected with him. Accordingly paragraph 3(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
Sd/-
(K.SHRAVAN)
Place : Hyderabad Partner
Date : 27 May 2019 Membership No. 215798

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 reporting of SHILPAMEDICARE LIMITED ("the Company") as of 31 March 2019 in conjunction with ouraudit of the standalone Ind AS financial statements of the Company for the year ended onthat date.

Management's Responsibility for Internal financial Controls

The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by considering the essential components of internal controlstated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by the Institute of Chartered

Accountants of India (‘ICAI'). These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013

Auditor's Responsibility

Our responsibility is to express an opinion on the Company'sinternal financial controls over financial reporting with reference to financialstatements based on our audit. We conducted our audit accordance with the Guidance Note onAudit of Internal Financial Controls over Financial Reporting (the "GuidanceNote") and the

Standards on Auditing to the extent applicable to an audit of internalfinancial controls both applicable to an audit of Internal Financial

Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting with reference to financialstatements was established and maintained and if controls operated effectively in allmaterial aspects.

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 their operating effectiveness. Our audit ofinternal financial controls over financial reporting included obtaining an understandinginternal 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 ofthe risks 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 reportingover financial with reference to these financial statements is a process designed toprovide 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 with reference to these financial statements includes those policies andprocedures that:

1. pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the Company the assetsof the company;

2. provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditure of the Company are beingmade only in accordance with authorisations of management and directors of the Company;and

3. provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the Company's assetsthat could have a material effect on the financial statements.

. 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 reference tothese financial statements to future periods are subject to the risk that the internalfinancial control over financial with reference to these financial statements may becomeinadequate because of changes in conditions or that the degree of compliance withpolicies 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 operating effectively as at 31 March 2019 basedon the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the

Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India.

for BRAHMAYYA & CO.
Chartered Accountants
Firm's Regn No. 000513S
Sd/-
(K.SHRAVAN)
Place : Hyderabad Partner
Date : 27 May 2019 Membership No. 215798

.