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Sun Pharma Advanced Research Company Ltd.

BSE: 532872 Sector: Others
NSE: SPARC ISIN Code: INE232I01014
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VOLUME 33251
52-Week high 311.90
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Mkt Cap.(Rs cr) 7,610
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OPEN 291.00
CLOSE 290.15
VOLUME 33251
52-Week high 311.90
52-Week low 141.00
P/E
Mkt Cap.(Rs cr) 7,610
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sun Pharma Advanced Research Company Ltd. (SPARC) - Auditors Report

Company auditors report

To the Members of Sun Pharma Advanced Research Company Limited

Report on the Audit of the Ind AS Financial Statements Opinion

We have audited the accompanying Ind AS financial statements of Sun Pharma AdvancedResearch Company Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2020 the Statement of Profit and Loss including the Statement of OtherComprehensive Income the Cash Flow Statement and the Statement of Changes in Equity forthe year then ended and notes to the Ind AS financial statements including a summary ofsignificant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Ind AS financial statements give the information required bythe Companies Act 2013 as amended ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at March 31 2020 its loss includingother comprehensive income its cash flows and the changes in equity for the year ended onthat date.

Basis for Opinion

We conducted our audit of the Ind AS financial statements in accordance with theStandards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the ‘Auditor'sResponsibilities for the Audit of the Ind AS Financial Statements' section of our report.We are independent of the Company in accordance with the ‘Code of Ethics' issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the Ind AS financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Ind AS financial statements for the financial year endedMarch 31 2020. These matters were addressed in the context of our audit of the Ind ASfinancial statements' as a whole and in forming our opinion thereon and we do notprovide a separate opinion on these matters. For each key audit matter below ourdescription of how our audit addressed the matter is provided in that context. We havedetermined the matters described below to be the key audit matters to be communicated inour report. We have fulfilled the responsibilities described in the Auditor'sresponsibilities for the audit of the Ind AS financial statements section of our reportincluding in relation to these matters. Accordingly our audit included the performance ofprocedures designed to respond to our assessment of the risks of material misstatement ofthe Ind AS financial statements. The results of our audit procedures including theprocedures performed to address the matters below provide the basis for our audit opinionon the accompanying Ind AS financial statements.

Key audit matter How our audit addressed the key audit matter
Revenue recognition (as described in Note 42 of the Ind AS financial statements)
The Company is engaged in the business of Research and Development of pharmaceutical products. The Company has various contractual arrangements with customers which are entered into at various stages of research and development. The Company in line with Ind AS 115 recognizes revenue based on the contractual terms and performance obligations with customers. Some of these arrangements involve judgments which may impact the manner and timing of revenue recognition. Our audit procedures amongst others included the following:
Considering that contractual arrangements with customers involve judgments which may impact the manner and timing of revenue recognition it is considered as a Key audit matter. Read the accounting policy for revenue recognition of the Company and assessed compliance of the policy with the principles enunciated under Ind AS 115.
Evaluated and tested the design and operating effectiveness of management's controls in respect of revenue recognition.
Performed test of details on sample contracts.
Assessed the disclosures in the accompanying Ind AS financial statements.
Evaluation of direct tax and indirect tax litigations (as described in Note 40 of the Ind AS financial statements)
The Company has material direct tax and indirect tax litigations which involve significant judgment to determine the possible outcome of these disputes and accordingly it is considered as key audit matter. Our audit procedures amongst others included the following:
Obtained list of direct tax and indirect tax litigations as at March 31 2020 from management.
Involved our experts to assess the management's assessment of the possible outcome of the disputes relating to direct tax and indirect tax litigations.
Our experts also considered legal precedence and other rulings in evaluating management's position on these uncertain direct tax and indirect tax litigations.
Discussed the matters with the management and Company's Tax Head to understand the possible outcome of these disputes.
Evaluated and tested the design and operating effectiveness of management's controls in respect of direct tax and indirect tax.
Assessed contingent liability disclosure in the accompanying Ind AS financial statements

Other Information

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisReport and Board's Report but does not include the Ind AS financial statements and ourauditor's report thereon. The Management Discussion and Analysis Report and Board's Reportis expected to be made available to us after the date of this auditor's report.

Our opinion on the Ind AS financial statements does not cover the other information andwe do not express any form of assurance conclusion thereon.

In connection with our audit of the Ind AS financial statements our responsibility isto read the other information identified above when it becomes available and in doing soconsider whether such other information is materially inconsistent with the Ind ASfinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated

Responsibilities of Management for the Ind AS Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these Ind AS financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the Ind AS financial statementsthat give a true and fair view and are free from material misstatement whether due tofraud or error.

In preparing the Ind AS financial statements management is responsible for assessingthe Company's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

The Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the Ind AS 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 stat. IndASfinancial

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

I ntify and assess the risks of material misstatement of the Ind AS financialstatements whether due to fraud or error de 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 to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.

E valuate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

C onclude on the appropriateness of management's use of the going concern basis ofaccounting 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.

E valuate the overall presentation structure and content of the Ind AS financialstatements including the disclosures and whether the Ind AS financial statementsrepresent 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 significant auditand audit findings including anyefficiencies 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 Ind AS financial statements forthe financial year ended March 31 2020 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) 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 1" a statement on the matters specified inparagraphs 3 and 4 of the Order.

2. As r equiredby Section 143(3) of the Act we report that:

( We have sought and obtained all the information and explanations which to the best ofour knowledge and belief were a) necessary for the purposes of our audit;

(b I ) n 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;

( The Balance Sheet the Statement of Profit and Loss including the Statement of OtherComprehensive Income the c) Cash Flow Statement and Statement of Changes in Equity dealtwith by this Report are in agreement with the books of account;

( I d) n our opinion the aforesaid Ind AS financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended;

( On the basis of the written representations received from the directors as on March31 2020 taken on record by the e) Board of Directors none of the directors isdisqualified as on March 31 2020 from being appointed as a director in terms of Section164 (2) of the Act;

( With respect to the adequacy of the internal financial controls over financialreporting of the Company with reference f) to these Ind AS financial statements and theoperating effectiveness of such controls refer to our separate Report in "Annexure2" to this report;

( Based on the information and explanations provided to us and bases on our examinationof books of accounts the g) Company has not accrued / paid any managerial remuneration toits director. Accordingly the provision of section 197 read with Schedule V to the Actare not required to be complied with;

(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 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed the impact of pending litigations on its financialposition in its Ind AS financial statements Refer Note 40 to the Ind AS financialstatements;

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.

Annexure 1 referred to in paragraph 1 under the heading "Report on Other Legal andRegulatory Requirements" of our report of even date RE: SUN PHARMA ADVANCED RESEARCHCOMPANY LIMITED (‘THE COMPANY')

(i) ( The Company has maintained proper records showing full particulars includingquantitative details and situation of a) fixed assets by management during the year butthere is a regular programme of (b All fixed assets have not been physically verified )verification which in our opinion is reasonable having regard to the size of the Companyand the nature of its assets. No material discrepancies were noticed on such verification.

According to the information and explanations given by management with respect to thetitle deeds of immovable properties included in property plant and equipment and basedon the examination of the High Court Order for demerger dated March 28 2007 provided tous we report the following:

Type of asset Gross Block as on March 31 2020 Net Block as on March 31 2020 Remarks
(INR Lakhs) (INR Lakhs)
R&D building (4th and 5th Floor) located at 17-B Mahal Industrial Estate Off. Mahakali Caves Road Andheri (East) Mumbai 400093 admeasuring 1041.29 square meters. 228.87 209.70 The building was transferred (pending registration) to the Company pursuant to a scheme of arrangement in the nature of demerger and transfer of Innovative Research and Development business of Sun Pharmaceutical Industries Limited under Section 391 to 394 of the Companies Act 1956 in terms of the approval of the Honorable High court of Gujarat. The agreement is in the name of Sun Pharmaceutical Industries Limited

(ii) According to the information and explanation given to us and having regard to thenature of the Company's business the Company does not have any inventories during theyear since procurements are issued directly for consumption to the user department.Accordingly the provisions of clause 3(ii) of the Order are not applicable to the Companyand hence not commented upon.

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii) (a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities granted in respect of whichprovisions of section 185 and 186 of the Companies Act 2013 are applicable and hence notcommented upon.

(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable to the Companyand hence not commented upon.

(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under section 148(1) of the Act for theproducts / services of the Company. Accordingly the provisions of clause 3(vi) of theOrder are not applicable to the Company and hence not commented upon.

(vii) ( U a) ndisputed statutory dues including provident fund employees' stateinsurance income-tax service tax duty of custom goods and service tax cess and otherstatutory dues have generally been regularly deposited with the appropriate authoritiesthough there has been a slight delay in a few cases.

(b A ) ccording to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax service taxduty of custom goods and service tax cess and other statutory dues where applicablewere outstanding at the year end for a period of more than six months from the date theybecame payable.

( Ac) ccording to the records of the Company the dues of income-tax sales-taxservice tax duty of custom value added tax goods and service tax and cess whereverapplicable and which have not been deposited on account of any dispute are as follows:

Name of the Statute Nature of dues Amount involved (INR in lakhs)* Amount paid under protest (INR in lakhs) Amount unpaid (INR in lakhs) Period to which the amount relates Forum where the dispute is pending
The Income Tax Act 1961 Income Tax and Interest 9610.86 4512.33 5098.53 A.Y. 2011 12; 2013 14To 2016-17 Commissioner of Income Tax (Appeals)
The Central Excise Act1944 Service Tax and Penalty 7100.22 172.65 6927.57 April 2016 to June 2017 Custom Excise and Service Tax Appellate Tribunal (CESTAT)

(viii) I n our opinion and according to the information and explanations given bymanagement the Company has not defaulted in repayment of loans or borrowing toGovernment. The Company did not have any outstanding loans or borrowing dues o debentureholders during the year. inrespectofafinancialinstitution or bank or dues

(ix) According to the information and explanations given by the management the Companyhas not raised any money by way of initial public offer / further public offer / debtinstruments and term loans. Accordingly the provisions of clause 3(ix) of the Order arenot applicable to the Company and hence not commented upon

(x) Based upon the audit procedures performed for the purpose of reporting true andfair view of the Ind AS financial statements and according to the information andexplanations given by management we report that no fraud by the Company or no fraud onthe Company by the officers and employees of the Company has been noticed or reportedduring the year.

(xi) According to the information and explanations given by the management the Companyhas not accrued / paid managerial remuneration during the year. Accordingly theprovisions of clause 3(xi) of the Order are not applicable to the Company and hence notcommented upon.

(xii) I n our opinion the Company is not a nidhi company. Accordingly the provisionsof clause 3(xii) of the Order are not applicable to the Company and hence not commentedupon.

(xiii) According to the information and explanations given by management transactionswith the related parties are in compliance with section 177 and 188 of Companies Act 2013where applicable and the details have been disclosed in the notes to the Ind AS financialstatements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) of the Order are notapplicable to the Company and hence not commented upon.

(xv) According to the information and explanations given by management the Company hasnot entered into any non-cash transactions with directors or persons connected with him asreferred to in section 192 of the Act.

(xvi) According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.

Annexure 2 to the Independent Auditor's Report of even date on the Ind AS FinancialStatements of Sun Pharma Advanced Research Company Limited

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 Sun PharmaAdvanced Research Company Limited ("the Company") as of March 31 2020 inconjunction with our audit of the Ind AS financial statements of the Company for the yearended 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. 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 the 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 Act.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these Ind AS financial statementsbased on our audit. We conducted our audit in accordance with the Guidance Note on Auditof Internal Financial Controls Over Financial Reporting (the "Guidance Note")and the Standards on Auditing as specified under section 143(10) of the Act to the extentapplicable to an audit of internal financial controls and both issued by the Institute ofChartered Accountants of India. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls over financial reporting withreference to these standalone Ind AS financial statements was established and maintainedand if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting with reference to these Ind ASfinancial statements and their operating effectiveness. Our audit of internal financialcontrols over financial reporting included obtaining an understanding of internalfinancial controls over financial reporting with reference to these Ind AS financialstatements assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the internal financial controls over financialreporting with reference to these Ind AS financial statements.

Meaning of Internal Financial Controls Over Financial Reporting With Reference to theseFinancial Statements

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

Inherent Limitations of Internal Financial Controls Over Financial Reporting WithReference to these Financial Statements

Because of the inherent limitations of internal financial controls over financialreporting with reference to these Ind AS financial statements including the possibilityof collusion or improper management override of controls material misstatements due toerror or fraud may occur and not be detected. Also projections of any evaluation of theinternal financial controls over financial reporting with reference to these Ind ASfinancial statements to future periods are subject to the risk that the internal financialcontrol over financial reporting with reference to these Ind AS financial statements maybecome inadequate because of changes in conditions or that the degree of compliance withthe policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these Ind AS financial statements andsuch internal financial controls over financial reporting with reference to these Ind ASfinancial statements were operating effectively as at March 31 2020 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.

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