TO THE MEMBERS OF SIMBHAOLI SUGARS LIMITED
Report on the audit of the Standalone financial statements
1. We have audited the accompanying standalone Ind AS financial statements of SimbhaoliSugars Limited ("the Company") which comprise the Balance Sheet as at March31st 2020 and the Statement of Profit and Loss (including Other Comprehensive Income)Statement of Changes in Equity and Statement of Cash Flows for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the basis for qualifiedopinion paragraph below the aforesaid Standalone Ind AS 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 accounting principlesgenerally accepted in India of the state of affairs (financial position) of the Companyas at March 31st 2020 and total comprehensive loss (comprising of loss and othercomprehensive loss) its cash flows and the changes in equity for the year then ended.
Basis for Qualified opinion
i) We draw attention to Note No. 4 of the statement regarding non provisions forimpairment in the carrying value of property plant and equipment. We are not madeavailable of appropriate impairment assessment carried out by the management andaccordingly we are unable to comment on the same including compliance with the Ind AS-36(Impairment of Assets') and any consequential adjustments that may arise in thisregard in these financial results.
ii) We draw attention to Note No. 10 of the Statements regarding non-provision ofinterest expense amounting Rs.13146.17 Lakhs (Previous year Rs. 12336.46 Lakhs) oncertain borrowings for the year ended March 2020 for the reasons stated in the said note.The total amount of interest expense not provided for in the accounts aggregates to Rs.37454.23 Lakhs till 31st March 2020(Previous year Rs.24307.59 Lakhs). Had the aforesaidinterest expense been provided for the Finance Cost Net Loss after tax and TotalComprehensive Loss for the year ended March 31st 2020 would have been increased by Rs.13146.17 Lakhs (P.Y. Rs. 12336.46 Lakhs) the Current Financial Liability as at March2020 would have been increased and shareholder's funds as at March 31st 2020 would havebeen decreased by Rs. 37454.23 Lakhs (P.Y. 24307.59 Lakhs)
iii) We draw attention to Note No. 24 of the statement regarding non provision ofdisputed value of bagasse amounting to Rs. 253.13 Lakhs sold to Simbhaoli Power PrivateLimited a subsidiary company for the reasons stated in the said note. Consequently therevenue for the year has been overstated; Net loss and total comprehensive Income for theyear has been understated; Receivables and total equity as at March 31st 2020 has beenoverstated by the aforesaid amount.
iv) We draw attention to Note No.6 of the Statement regarding non- provision ofinterest liability in respect of delayed payment of sugarcane price for the reasons statedin the said note. The amount of interest not provided for in the books has not beenascertained. Our report is modified in respect of above matters
Material Uncertainty related to Going Concern:
As stated in Note No. 4 the financial statement of the company has been prepared ongoing concern basis. Events or conditions as set forth in Note No. 4 indicate that amaterial uncertainty exists that may cast significant doubt on the company's ability tocontinue as going concern. The ability of the Company to continue as going concern dependson the decision of National Company Law Tribunal under the Insolvency and Bankruptcy Code2016 the company's ability to get its borrowings restructured as stated in the said noteand turnaround of the sugar and distilleries operation on sustainable basis.
Our report is not modified in respect of the above matter.
We draw your attention to Note No. 4 to the financial statement which describes theManagement's assessment of the impact of COVID -19 pandemic and the resultant lock-down onthe significant uncertainties involved in preparing the financial statements. Based on theinformation available on this date Management believes that no further adjustments arerequired to the financial statement. However in view of very uncertain economicenvironment a definitive assessment of the impact is highly dependent upon circumstancesas they evolve in future and actual results may differ from those estimated as at the dateof approval of these financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matter:
|S. No. ||Key Audit Matters ||Auditor's Response |
|1 ||Impact of government policies/ notifications on recognition of subsidy accruals/claims and their recoverability ||Principal Audit Procedures |
| ||During the year the Company has recognized accruals/subsidy claims amounting to Rs. 5915.84 Lakhs (P.Y. 4201.83 Lakhs). As at March 31st 2020 the Company has receivables of Rs. 7292.25 Lakhs relating to such claims which is significant to the financial statements. ||We understood and tested the design and operating effectiveness of controls as established by management in recognition and assessment of the recoverability of the claims. We evaluated the management's assessment regarding reasonable certainty for complying with the relevant conditions as specified in the notifications/policies and collections. |
| ||We consider this as key audit matters because recognition of accruals/claims and assessment of recoverability of the claims is subject to significant judgment of the management. The area of judgment includes certainty around the satisfaction of conditions specified in the notifications/policies collections provisions thereof likelihood of variation in the related computation rates and basis for determination of accruals/ claims. ||We considered the relevant notifications/policies issued by various authorities to ascertain the appropriateness of the recognition of accruals/ claims adjustments to claims already recognized pursuant to changes in the rates and basis for determination of claims. |
| ||For details: - Refer Note No. 20 to the Financial Statements. ||We tested the ageing analysis and assessed the information used by the management to determine the recoverability of the claims by considering claim collection against historical trends. |
| || ||Based on the fulfilment of the conditions as precedent in relevant notification management is reasonably certain about the recoverability of the claims/ accrual. |
| || ||Based on the above procedures performed the management's estimates related to recognition of subsidy accruals/claim and their recoverability is considered to be reasonable. |
|2. ||Valuation and determination of inventory ||Principal Audit Procedures |
| ||As on March 31st 2020 the Company has inventory of sugar with the carrying value Rs. 48795.81 Lakhs which forms major part of the total assets of the company. The inventory of sugar is valued at the lower of cost and net realizable value. ||We understood and tested the design and operating effectiveness of controls as established by the management for valuation of inventory of sugar. |
| ||The Physical Verification of inventory could not be observed by us due to lock-down restrictions at the year-end. ||We considered various factors including the actual selling price prevailing around and subsequent to the year- end minimum selling price & monthly quota and other notifications of the Government of India initiatives taken by the Government with respect to sugar industry as a whole. |
| ||We considered the value of the inventory of sugar as a key audit matter given the relative size of the balance in the financial statements and significant judgment involved in the consideration of factors such as minimum sale price monthly quota fluctuation in selling prices and the related notifications of the Government in determination of net realizable value. ||Based on the above procedures performed the management's determination of the net realizable value of the inventory of sugar as at the year ends and comparison with cost for valuation of inventory is considered to be reasonable. |
| || ||The Company has procedure of physical verification of inventories at regular intervals. Physical Verification of finished goods By products across all units were carried out during the month of June 2020 in the presence of independent firm of Chartered Accountants who have been entrusted with the responsibilities of observing and participating in such verification. |
| || ||We have reviewed the credentials technical and other expertise of the professional firm deployed for carrying amount and observing verification. |
| || ||We received the report and certificate submitted by |
|S. No. ||Key Audit Matters ||Auditor's Response |
| || ||Chartered Accountants Firm. |
| || ||We applied alternate procedures to audit the existence of inventory as per guidance provided in SA 501 "Audit Evidence-. Specific Considerations for Selected Items" which include inspection of supporting documentation relating to purchases production consumption and sales results of cyclical count performed by the management through the year and such other third party evidences as applicable. |
| || ||While necessary review and other corroborative evidence were obtained and verified reliance has been placed on professional expert's report and conclusion drawn by them on the matter. |
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the annual report but does not includethe financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information; weare required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the financialstatements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the companies act 2013("the Act")with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of the stateof affairs(financial position) profit or loss (financial performance including othercomprehensive income) changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards(Ind AS) specified under section 133 of the Act.
This responsibility also includes maintenance of adequate accounting records inaccordance 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 accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial Statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the 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 todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the companyhas adequate internal financial controls with reference to financial statements in placeand the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in manner that achieves fair presentation.
We communicate with those charged with governance regarding among othermatters 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 we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror 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 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure A" statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable ;
2. With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended in our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of section 197 of the Act and not in excess of the limits laid downtherein.
3. 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) Except for the effects of the matter described in the Basis for Qualified Opinionparagraph above in our opinion proper books of account as required by law have been keptby the company so far as it appears from our examination of those books.
(c) The Balance Sheet the Statement of Profit and Loss (including other comprehensiveloss) the Statement of Changes in Equity and Cash Flow Statement dealt with by thisReport are in agreement with the books of account.
(d) Except for the effects of the matter described in the Basis for Qualified Opinionparagraph above in our opinion the aforesaid standalone financial statements comply withthe Accounting Standards specified under Section 133 of the Act.
(e) The qualifications relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above.
(f) On the basis of the written representations received from the directors as on March31st 2020 taken on record by the Board of Directors none of the directors isdisqualified as on March 31st 2020 from being appointed as a director in terms of Section164 (2) of the Act.
(g) With respect to the adequacy of the internal financial controls with reference tofinancial statement of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure B".
(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 financial statements. Refer Note no. 6 to the financial statement.
ii. The Company did not have any long-term contracts including derivative contracts forwhich 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.
| ||For MITTAL GUPTA & CO. |
| ||Chartered Accountants |
| ||(Firm's Registration No. 01874C) |
| ||(B. L. Gupta) |
| ||Partner |
|Place : Kanpur ||(Membership No. 073794) |
|Date : July 30 2020 ||UDIN: 20073794AAAABP5936 |
Annexure - A' to the Independent Auditors' Report
(The "Annexure A" referred to in our Independent Auditor's Report of evendate to the members of the Company on the standalone financial statements for the yearended 31st March 2020.)
i. In respect of company's fixed assets:
a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant & equipment.
b) The Company has a phased program of physical verification of its property plant& equipment which in our opinion is reasonable having regard to the size of thecompany and the nature of its assets. Pursuant to the program certain property plant&equipment were physically verified by the management during the year. According tothe information and explanations given to us no material discrepancies were noticed onsuch verification.
c) The title deeds of all immovable properties as disclosed in the financialstatements except in case of an immovable properties situated at Brijnathpur havingcarrying amount of Rs. 8.62 Lakhs are held in the name of the company
ii. The inventories (other than lying with third parties) have been physically verifiedby the management at reasonable interval during the year. In our opinion and according tothe information and explanations given to us the frequency of such verification isreasonable. As explained to us no material discrepancies were noticed on physicalverification of inventories as compared to book records.
iii. According to the information and explanations given to us and based on ourexaminations of the records in our opinion the Company has not granted any secured orunsecured loan to the companies firms limited liability partnership and other partiescovered in the register maintained under section 189 of the Companies Act 2013.Accordingly paragraph 3(iii) of the said order is not applicable to the company.
iv. According to the information and explanations given to us and based on ourexaminations of the records in our opinion the company has complied with the provisionsof the Section 185 and 186 of the Companies Act 2013 in respect to loans and investmentsmade guarantee and securities provided by it.
v. According to the information and explanations given to us in our opinion theCompany has not accepted any deposit in contravention of the directives issued by theReserve Bank of India and the provisions of sections 73 to 76 or any other relevantprovisions of the Act and rules framed there under. As informed to us no order has beenpassed by the Company Law Board or National Company Law Tribunal or Reserve Bank of Indiaor any court or any other Tribunal in this connection.
vi. We have broadly reviewed the cost records maintained by the Company pursuant to theCompanies (Cost records and Audit) Rules 2014 under section 148 of the Companies Act andare of the opinion that prima facie the prescribed cost record 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.
vii. In respect of statutory dues:
a) According to the information and explanations given to us and based on ourexaminations of the records in our opinion the Company has generally been regular indepositing undisputed statutory dues in respect of provident fund investor education andprotection fund employees' state insurance income tax sales tax services tax customsduty excise duty value added tax cess goods and services tax and other materialstatutory dues as applicable with the appropriate authorities though there has beenslight delay in few cases. There are no undisputed statutory dues as referred to above asat 31st March2020 outstanding for a period of more than six months from the date theybecome payable except for the following:
| ||(Amount in Lakhs.) |
|Purchase Tax ||15.34 |
|Import Duty ||416.37 |
|TDS Demand ||0.48 |
|Vat Payable ||9.87 |
|Kerala Turnover Tax ||74.71 |
b) According to the information and explanations given to us the particulars of Incometax Service-tax Sales-tax Custom Duty Excise Duty Entry tax Value Added Tax Goodsand Service Tax as at 31st March 2020 which have not been deposited on account of anydispute are as reported in Note No.16 to the accompanying financial statements.
viii. According to the information and explanations given to us and as per examinationof records the Company has defaulted in repayment of loans and borrowings to banks andGovernment. Details of defaults in respect of principal and interest dues to Governmentand banks are stated in Note No.10 to accompanying financial statements. The Company hasnot borrowed any money by way of issue of debentures.
ix. According to the information and explanations given to us and as per examination ofrecords and as per examination of records the company did not raise any money by way ofinitial public offer or further public offer (including debt instruments) or term loansduring the year. Accordingly paragraph 3(ix) of the order is not applicable to thecompany.
x. To the best of our knowledge and belief and according to the information andexplanations given to us no material fraud by the Company or on the Company by itsofficers or employees has been noticed or reported during the year.
xi. The Company has paid/ provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct.
xii. The Company is not a Nidhi Company. Accordingly the paragraph 3 (xii) of the Orderis not applicable to the Company.
xiii. According to the information and explanations given to us all transactions withthe related parties are in compliance with the provisions of sections 177 and 188 of theAct as applicable and the details of such related party transactions have been disclosedin the financial statements under Note no11 as required by the applicable IndianAccounting Standard (Ind AS) 24 Related Party Disclosures specified under Section 133 ofthe Act read with Rule 7 of the Companies (Accounts) Rules 2014.
xiv. According to the information and explanations given to us the Company has notmade any preferential allotment or private placement of shares fully or partly convertibledebentures during the year under review. Accordingly the provisions of Clause 3(xiv) ofthe Order are not applicable to the Company.
xv. In our opinion and on the basis of information and explanation given to us theCompany has not entered into any noncash transactions with its Directors or personsconnected to its directors and hence provisions of section 192 of the Companies Act 2013are not applicable to the Company.
xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Order are notapplicable to the Company.
| ||For MITTAL GUPTA & CO |
| ||Chartered Accountants |
| ||(Firm's Registration No. 01874C) |
| ||(B. L. Gupta) |
|Place : Kanpur ||Partner |
|Date : July 30 2020 ||(Membership No. 073794) |
Annexure - B' to the Independent Auditor's Report
(The Annexure - B' referred to in our Independent Auditors' Report to the membersof the Company on the standalone financial statements for the year ended March 312020)
Report on the Internal Financial Control under clause (i) of sub-section 3 of section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls with reference to financial statementsof Simbhaoli Sugars Limited ("the Company") as of 31st March 2020 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
Management's Responsibility for internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control 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 (ICAI). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including 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.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statement based on our audit.
We conducted our audit in accordance with the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting (the "Guidance Note") and theStandards on Auditing issued by ICAI and deemed to be prescribed under section 143(10) ofthe Companies Act 2013 to the extent applicable to an audit of internal financialcontrols both applicable to an audit of Internal Financial Controls and both issued bythe ICAI. 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 with reference to financial statement was establishedand maintained 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 control system with reference to financial statement and theiroperating effectiveness. Our audit of internal financial control with reference tofinancial statement included obtaining an understanding of internal financial control withreference to financial statement assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgement includingthe assessment of the risks of material misstatement of the financial statements whetherdue 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 systemwith reference to financial statement.
Meaning of Internal Financial Controls with reference to financial statement
A Company's internal financial control with reference to financial statement is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A Company's internal financial control withreference to financial statement includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the Company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the Company are being made only in accordance with 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 with reference to financialstatement
Because of the inherent limitations of internal financial controls with reference tofinancial statement including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statement to future periods are subject to the risk that theinternal financial controls over financial reporting may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.
In our opinion except for the matters described in the Basis for Qualified OpinionMaterial Uncertainty on Going Concern paragraph the Company has in all materialrespects an adequate internal financial controls system with reference to financialstatement and such internal financial controls with reference to financial statement wereoperating effectively as at 31st March 2020 based on the internal controls withreference to financial statement criteria established by the Company considering thecomponents of internal controls stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the ICAI.
| ||For MITTAL GUPTA & CO |
| ||Chartered Accountants |
| ||(Firm's Registration No. 01874C) |
| ||(B. L. Gupta) |
|Place : Kanpur ||Partner |
|Date : July 30 2020 ||(Membership No. 073794) |