The Members of
SMS PHARMACEUTICALS LIMITED
Report on the Financial Statements
We have audited the accompanyingfinancial statements of SMS PHARMACEUTICALS LIMITED ("theCompany") which comprise the Balance Sheet as at March 31 2017 theStatementof Profit and Loss and the Cash Flow Statement for the year then ended and a summary ofsignificant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
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 ofthesefinancial statements that give a true and fair view of thefinancialpositionfinancial performance and cash fl ows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding 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 adequateinternalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
Our responsibility is to express an opinion on thesefinancial statements based on ouraudit.
We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under and the Order under Section 143(11)of the Act.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthefinancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in thefinancial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement ofthefinancial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internalfinancial control relevant to the Company's preparation ofthefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof thefinancial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on thefinancial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaidfinancial statements give the information required by the Act inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at March31 2017 and its Profit and its Cash Flow for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")as amended issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the "AnnexureA" a statement onthe matters specified in paragraphs 3 and 4 of the Order.
2. As required by section 143 (3) of the Act we report that: a. We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purpose of our audit; b. In our opinion proper books ofaccount as required by law have been kept by the Company so far as it appears from ourexamination of those books; c. The Balance Sheet the Statement of Profit and Loss and theCash Flow Statement dealt with by this Report are in agreement with the books of account.d. In our opinion the aforesaidfinancial statements comply with the Accounting Standardsspecified under section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. e. On the basis of written representations received from the directors as onMarch 31 2017 taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2017 from being appointed as a director in terms of Section164 (2) of the Act. f. With respect to the adequacy of the internal fi nancial controlsoverfinancial reporting of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B". g. With respect to theother matters to be included in the Auditor's Report in accordance with Rule 11 of theCompanies (Audit and Auditors) Rules 2014 and in our opinion and to the best of ourinformation and according to the explanations given to us: i. The Company has disclosedthe impact of pending litigations as at 31st March 2017 on itsfinancial position initsfinancial statements as referred to in note 30 31 and 32 to thefinancial statements.ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses. iii. The Company has been regular intransferring amounts to the Investor Education and Protection Fund in accordance with therelevant provisions of the Companies Act 2013 and the Rules made there under. iv. TheCompany has provided requisite disclosures in itsfinancial statements as to holdings aswell as dealings in Specifi ed Bank Notes during the period from 8th November 2016 to30th December 2016 and these are in accordance with the books of accounts maintained bythe Company. Refer to Note 2.27 to thefinancial statements. for RAMBABU & Co.
Chartered Accountants FRN: 002976S
Place: Hyderabad Date: 30-05-2017
"Annexure A" to the Independent Auditors' Report
Referred to in paragraph 1 under the heading Report on Other Legal &Regulatory Requirement' of our report of even date to thefinancial statements of theCompany for the year ended March 31 2017:
a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets;
b) The Company has a regular program of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner. In our opinion the periodicity ofphysical verification is reasonable having regard to the size of the Company and thenature of its assets. According to the information and explanations given to us nomaterial discrepancies were noticed on such verification.
a) As explained to us the inventories except goods in transit and stocks lying withthird parties have been physically verified during the year by the management atreasonable intervals
. b) In our opinion and according to the information and explanations given to us theprocedures of physical verification of inventories followed by the management werereasonable and adequate in relation to the size of the Company and nature of its business.
c) In our opinion and according to the information and explanations given to us theCompany has maintained proper records of its inventories and no material discrepancieswere noticed on physical verification.
iii) The Company has not granted any loans secured or unsecured to companies firmsLimited Liability partnerships or other parties covered in the Register maintained undersection 189 of the Act. Accordingly the provisions of clause 3
(iii) (a) to (c) of the Order are not applicable to the Company and hence not commentedupon. iv) In our opinion and according to the information and explanations given to usthe Company has complied with the provisions of section 185 and 186 of the Companies Act2013 in respect of loans investments guarantees and security. v) The Company has notaccepted any deposits from the public and hence the directives issued by the Reserve Bankof India and the provisions of Sections 73 to 76 or any other relevant provisions of theAct and the Companies (Acceptance of Deposit) Rules 2015 with regard to the depositsaccepted from the public are not applicable.
vi) We have broadly reviewed the cost records maintained by the Company pursuant to therules prescribed by the Central Government of India under Section 148(1) of the CompaniesAct 2013 and are of the opinion that prima facie the prescribed cost records have beenmade and maintained. We have however not made a detailed examination of the cost recordswith a view to determine whether they are accurate or complete
. vii) a) According to information and explanations given to us and on the basis of ourexamination of the books of account and records the Company has been generally regularin depositing undisputed statutory dues including Provident Fund Employees StateInsurance Income-Tax Sales tax Service Tax Duty of Customs Duty of Excise Valueadded Tax Cess and any other statutory dues with the appropriate authorities. Accordingto the information and explanations given to us no undisputed amounts payable in respectof the above were in arrears as at March 31 2017 for a period of more than six monthsfrom the date on when they become payable.
b) According to the information and explanation given to us there are no dues ofincome tax sales tax service tax duty of customs duty of excise value added taxoutstanding on account of any dispute.
c) The Company has been regular in transferring amounts to the Investor Education andProtection Fund in accordance with the relevant provisions of the Companies Act 2013 andthe Rules made there under.
viii) In our opinion and according to the information and explanations given to us theCompany has not defaulted in the repayment of dues to banks. The Company has not issuedany debentures.
ix) Based upon the audit procedures performed and the information and explanationsgiven by the management the Company has not raised moneys by way of initial public offeror further public offer including debt instruments and term Loans. Accordingly theprovisions of clause 3
(ix) of the Order are not applicable to the Company and hence not commented upon.
x) Based upon the audit procedures performed and the information and explanations givenby the management we report that no fraud by the Company or on the Company by itsofficers or employees has been noticed or reported during the year.
xi) Based upon the audit procedures performed and the information and explanationsgiven by the management the managerial remuneration has been paid or provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Companies Act 2013.
xii) In our opinion the Company is not a Nidhi Company. Therefore the provisions ofclause 4
(xii) of the Order are not applicable to the Company.
xiii) In our opinion all transactions with the related parties are in compliance withsection 177 and 188 of Companies Act 2013 and the details have been disclosed in theFinancial Statements as required by the applicable accounting standards.
xiv) Based upon the audit procedures performed and the information and explanationsgiven by the management the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year underreview. Accordingly the provisions of clause 3
(xiv) of the Order are not applicable to the Company and hence not commented upon. xv)Based upon the audit procedures performed and the information and explanations given bythe management the Company has not entered into any non-cash transactions with directorsor persons connected with him. Accordingly the provisions of clause 3
(xv) of the Order are not applicable to the Company and hence not commented upon. xvi)In our opinion the Company is not required to be registered under section 45 IA of theReserve Bank of India Act 1934 and accordingly the provisions of clause 3
(xvi) of the Order are not applicable to the Company and hence not commented upon.
for RAMBABU & Co.
Chartered Accountants FRN: 002976S
Place: Hyderabad Date: 30-05-2017
"Annexure B" 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 internalfinancial controls overfinancial reporting of SMSPHARMACEUTICALS LIMITED ("the Company") as of March 31 2017 in conjunction withour audit of thefinancial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management responsible for establishing and maintaining internalfinancialcontrols based on the internal control overfinancial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls over Financial Reporting issued by theInstitute of Chartered Accountants of India. These responsibilities include the designimplementation and maintenance of adequate internalfinancial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to Company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliablefinancial information as required under theCompanies Act 2013.
Our responsibility is to express an opinion on the Company's internalfinancial controlsoverfinancial reporting based on our audit. We conducted our audit in accordance with theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") and the Standards on Auditing issued by ICAI and deemed to beprescribed under section 143(10) of the Companies Act 2013 to the extent applicable toan audit of internalfinancial controls both 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 adequateinternalfinancial controls overfinancial reporting was established and maintained and ifsuch controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internalfinancial controls overfinancial reporting and their operating effectiveness.Our audit of internalfinancial controls overfinancial reporting included obtaining anunderstanding of internalfinancial controls overfinancial 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 thefinancial 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 internalfinancial controlsoverfinancial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A Company's internalfinancial control overfinancial reporting is a process designed toprovide reasonable assurance regarding the reliability offinancial reporting and thepreparation offinancial statements for external purposes in accordance with generallyaccepted accounting principles. A Company's internalfinancial control overfinancialreporting includes those policies and procedures that
(1) Pertain to the maintenance of records that in reasonable detail accurately andfairly refl ect the transactions and dispositions of the assets of the Company; (2)Provide reasonable assurance that transactions are recorded as necessary to permitpreparation offinancial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the Company are being made only inaccordance with authorizations of management and directors of the Company; and (3) Providereasonable assurance regarding prevention or timely detection of unauthorized acquisitionuse or disposition of the Company's assets that could have a material effect onthefinancial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internalfinancial controls overfinancialreporting 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 internalfinancial controls overfinancialreporting to future periods are subject to the risk that the internalfinancial controloverfinancial 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 internalfinancialcontrols system overfinancial reporting and such internalfinancial controls overfinancialreporting were operating effectively as at March 31 2017 based on the internal controloverfinancial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
for RAMBABU & Co.
Chartered Accountants FRN: 002976S
Place: Hyderabad Date: 30-05-2017