To the Members of SICAGEN INDIA LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of SICAGEN INDIA LIMITED("the Company") which comprise the Balance Sheet as at March 31 2019 theStatement of Profit and Loss the Statement of Changes in Equity and the Statement of CashFlows for the year ended on that date and notes to the financial statements including asummary of significant accounting policies and other explanatory information (hereinafterreferred to as "the standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at March 31 2019 the profit and totalcomprehensive income and changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theStandalone Financial Statements section of our report. We are independent of the Companyin accordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thestandalone financial statements under the provisions of the Companies Act 2013 and theRules 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 financial statements of the current period.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 be thekey audit matters to be communicated in our report
|Revenue Recognition (Ind AS 115) ||Audit Procedure |
|Recognition of revenue is complex due to several types of customer contracts across divisions. ||Audit procedure involved review of the Company's Ind AS 115 implementationprocessandkeyjudgmentsmadebymanagement evaluation of customer contracts in light of Ind AS 115 on sample basis and comparison of the same with management's evaluation and assessment of design and operating effectiveness of internal controls relating to revenue recognition. |
|The application of the new standard on recognition of revenue involves significant judgment and estimates made by the management which includes; || |
| Identification of performance obligations contained in contracts. ||Based on the procedures performed it is concluded that management's judgments with respect to recognition and measurement of revenue in light of Ind AS 115 is appropriate. |
| Determination of the most appropriate method for recognition of revenue relating to the identified performance obligations. ||Furthermore the appropriateness of the disclosures made in Note. 1.7 to the financial statements was assessed. |
| Assessment of transaction price. || |
| Allocation of the assessed price to the individual performance obligations. || |
|Existence and impairment of Trade Receivables ||Audit Procedure |
|TradeReceivablesaresignificanttotheCompany's financial statements. The Collectability of trade receivables is a key element of the company's working capital management which is managed on an ongoing basis by its management. Due to the nature of the Business and the requirements of customers various contract terms are in place which impacts the timing of revenue recognition. ||We performed audit procedures on existence of trade receivables which included substantive testing of revenue transactions obtaining trade receivable external confirmations and testing the subsequent payments received. |
|Given the magnitude and judgment involved in the impairment assessment of trade receivables we have identifi ed this as a key audit matter. ||Assessing the impact of trade receivables requires judgment and we evaluated management's assumptions in determining the provision for impairment of trade receivables by analyzing the ageing of receivables assessing significant overdue individual trade receivables and specific local risks combined with the legal documentations where applicable. |
| ||We tested the timing of revenue and trade receivables recognition based on the terms agreed with the customers. We also reviewed on a sample basis terms of the contract with the customers invoices raised etc. as a part of our audit procedures. |
| ||Legal cases have been filed in the case of some debtors and we have analyzed the company's chances of succeeding in the litigation. |
| ||Furthermore we assessed the appropriateness of the disclosures made in Note 7 & 40 to the financial statements. Our procedures did not identify any material exceptions. |
|Disposal of Fixed Assets and relevant taxation ||Audit Procedure |
|During the year the company has sold two lands for the value of Rs 4437 lakhs. ||Audit checks conducted for the Authorization of the sale of land and sale agreements were called for. Tax Opinions were obtained from Experts on the taxation of the sale transaction. |
|The costs of acquisition of these assets were Rs.244 lakhs. These assets were restated on 01.04.2016 as per the Ind As transition at Rs.4582 lakhs. ||The Company as per its computation of Book profits of Rs. 504 lakhs has given effect to the provision of Sec115JB explanation (2c) and thereby subjected the revaluation amounts under Ind AS transition provisions to MAT upon disposal of the relevant assets. |
|This resulted in a loss of Rs 145 lakhs which has been accounted in Statement of Profit & Loss A/c under head Other Expenses (Note 29) as Loss on sale of assets. ||The company has also given effect to the bad debts written off as described in Note no 29.2 in the expected credit losses. |
| ||The reversal of provisions for Expected Credit Loss model have not been considered for MAT purpose as they have not been deducted from MAT workings at the time of creation. |
| ||The company had written off Rs.11924 lakhs of Loans and advances as a part of Ind AS transition. One fifth of these advances have been claimed for Rs.2385 Lakhs U/s 115JB of MAT computation for the year 2018-19 & 2017-18. The company has taken expert legal opinion to support its position under MAT regular provisions of Income Tax and for related disclosures. |
| ||Our Audit Procedures did not identify any material exceptions. |
|Discussion on investments in subsidiaries ||Audit Procedure |
|Investments to the tune of Rs 12603 lakhs in subsidiaries are identified as a Key Audit Matter owing to the size and its impact in assessing the true and fair view of the Financials statements. ||Audit Procedures were performed to confirm the value of the investments and testing the same for impairment by reviewing the financial statements of the subsidiaries. |
| ||Our Audit Procedures did not identify any material exceptions. |
Information Other than the Standalone Financial Statements and Auditors' Report Thereon
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sAnnual Report but does not include the standalone financial statements and our reportthereon.
Our opinion on the standalone financial statements does not cover the other informationand 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 and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to 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.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors are responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the accounting Standardsspecified under section 133 of the Act read with the rule 3 of the Companies (IndianAccounting Standards) Rules 2015 and Companies (Indian Accounting Standards) AmendmentRules 2016. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate implementation and maintenance of accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statement that give a true andfair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone 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. The Board of Directors are also responsible foroverseeing the Company's financial reporting 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:
Identify and assess the risks of material misstatement of the standalonefinancial 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 Companies Act 2013 we are also responsible for expressing our opinion on whetherthe Company has adequate internal financial controls system in place and the operatingeffectiveness 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 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 standalonefinancial statements including the disclosures and whether the standalone financialstatements represent 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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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
As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the Annexure 1 a statement on the matters specifiedin paragraphs 3 and 4 of the Order to the extent applicable.
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 statement of changes in equity and the Cash Flow Statement dealt with by thisReport are in agreement with the books of accounts.
(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 3 of the Companies(Indian Accounting Standards) Rules 2015 and Companies (Indian Accounting Standards)Amendment Rules 2016.
(e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct.
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure 2Rs.".
(g) With respect to the matter to be included in the Auditors' Report under section197(16) of the Act as amended: In our opinion and to the best of our information andaccording to the explanations given to us the remuneration paid by the Company to itsdirectors during the year 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 in accordancewith Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to thebest 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 37 to the standalonefinancial statements; (ii) The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses.
(iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
Annexure 1 to the Independent Auditor's Report
Referred to in Paragraph 1 of Report on Other Legal and Regulatory Requirements of ourReport of even date
i. a) The Company has maintained proper records showing full particularsincluding quantitative details and situation of fixed assets.
b) As explained to us all the fixed assets have been physically verified by themanagement in a phased periodical manner which in our opinion is reasonable havingregard to the size of the Company and nature of its assets. According to the informationand explanations given to us no material discrepancies were noticed on such physicalverification.
c) According to the information and explanation given to us and on the basis ofexamination of records of the Company the title deeds of immovable properties are held inthe name of the Company.
ii. Physical verification of inventory has been conducted at reasonable intervals bythe management and no material discrepancies were noticed on such verification.
iii. In our opinion and according to the information and explanations given to us theCompany has not granted any loans secured or unsecured to companies firms or otherparties covered in the register maintained under section 189 of the Companies Act. (Basedon the above para matters referred in clause iii(a) iii(b) and iii(c) of paragraph 3 ofCompanies (Auditors Report) Order 2016 are not applicable).
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act 2013in respect of loans investments guarantees and security.
v. In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits during the year. Accordingly reporting under thisclause does not arise.
vi. We have broadly reviewed the books of account maintained by the Company pursuant tothe Rules made by the Central Government for the maintenance of cost records undersub-section (1) of Section 148 of the Companies Act in respect of Company's products andare of the opinion that prima facie the prescribed accounts and records have been madeand maintained. However we have not made a detailed examination of the cost records witha view to determine whether they are accurate or complete.
vii. a) According to the records of the Company and information and explanations givento us the Company is regular in depositing undisputed statutory dues including providentfund employees' state insurance income-tax goods & service tax wealth tax duty ofcustoms cess and any other statutory dues with the appropriate authorities. There are noundisputed statutory dues outstanding for more than six months.
b) As at March 31 2019 according to the records of the Company the following are theparticulars of the disputed dues on account of sales tax income tax customs duty wealthtax service tax and cess which have not been deposited on account of dispute:
|S.No ||Period ||Nature of Dues ||Not Paid ||Forum where Pending |
| || || ||(Rs. In Lakhs) || |
|1 ||AY 2009-10 ||Income Tax ||200 ||High Court |
|2 ||AY 2011-12 ||Income Tax ||1699 ||ITAT |
|3 ||AY 2015-16 ||Income Tax ||39 ||CIT(A) |
|4 ||FY 2016-17 ||CST ||14 ||Appellate Deputy Commissioner |
|5 ||FY 2017-18 ||CST ||2 ||Appellate Deputy Commissioner |
|6 ||FY 2012-13 & ||Service Tax ||3 ||Commissioner (Appeals) |
| ||FY 2013-14 || || || |
viii. Based on our audit procedures and according to the information and explanationsgiven to us by the management we are of the opinion that the Company has not defaulted inrepayment of loans or borrowings to a financial institution bank Government or debentureholders.
ix. The Company has not raised money by way of initial public offer or further publicoffer during the Current year and the term loans were applied for the purposes for whichthose were raised.
x. In our opinion and according to the information and explanations given to us nofraud on or by the Company has been noticed or reported during the financial period.
xi. In our opinion and according to the information and explanations given to us themanagerial remuneration has been paid or provided in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the CompaniesAct 2013
xii. In our opinion the Company is not a Nidhi Company. Accordingly clause xii ofPara 3 of Companies (Auditors Report) Order 2016 is not applicable.
xiii. In our opinion and according to the information and explanation given to us alltransactions with the related parties are in compliance with Sections 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the standalonefinancial statements as required by the applicable accounting standards.
xiv. The company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. (Based on theabove Para matters referred in clause (xiv) of paragraph 3 of Companies (Auditors Report)Order 2016 is not applicable).
xv. ln our opinion and according to the information and explanations given to us theCompany has not entered into any non - cash transactions with directors or personsconnected with the Directors. Accordingly clause xv of Para 3 of Companies (AuditorsReport) Order 2016 is not applicable.
xvi. In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-lA of the Reserve Bank of IndiaAct 1934. Accordingly clause xvi of Para 3 of Companies (Auditors Report) Order 2016 isnot applicable.
Annexure 2 to the Independent Auditor's Report
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 M/sSICAGEN INDIA LIMITED ("the Company") as of March 31 2019 in conjunctionwith our audit of the standalone 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 and maintaining internalfinancial controls 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. 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 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 Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal 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 was established andmaintained and if such controls operated effectively in all material respects. Our auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness. Ouraudit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgement including the assessment of the risks of materialmisstatement 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 authorizations ofmanagement and directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of theCompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
| ||For SRSV & Associates |
| ||Chartered Accountants |
| ||F.R.No.015041S |
| ||V. RAJESWARAN |
|Place: Chennai ||Partner |
|Date: 22nd May 2019 ||Memb.No.020881 |