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SRF Ltd.

BSE: 503806 Sector: Industrials
NSE: SRF ISIN Code: INE647A01010
BSE 00:00 | 16 Apr 6129.45 137.55
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NSE 00:00 | 16 Apr 6127.25 129.40
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OPEN 6000.00
PREVIOUS CLOSE 5991.90
VOLUME 4221
52-Week high 6363.95
52-Week low 3240.00
P/E 46.05
Mkt Cap.(Rs cr) 36,317
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 6000.00
CLOSE 5991.90
VOLUME 4221
52-Week high 6363.95
52-Week low 3240.00
P/E 46.05
Mkt Cap.(Rs cr) 36,317
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

SRF Ltd. (SRF) - Auditors Report

Company auditors report

To the Members of  SRF Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the standalone financial statements of SRF Limited (the Company) which comprise the standalone balance sheet as at 31 March 2020 and the standalone statement of profit and loss (including other comprehensive income) standalone statement of changes in equity and standalone statement of cash flows for the year then ended and notes to the standalone financial statements including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as standalone financial statements).

In our opinion and to the best of our information and according to the explanations given to us the aforesaid standalone financial statements give the information required by the Companies Act 2013 (Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at 31 March 2020 and profit and other comprehensive income changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those SAs are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the Standalone financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of most significance 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 financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters:

Accounting for derivativesIn view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
An important element of Company's fund-raising strategy involves various types of borrowings including foreign currency denominated borrowings and a combination of fixed and floating interest rates. The Company's operating activities are also exposed to significant foreign exchange risk (refer to note 38 of the standalone financial statements).  Tested the design implementation and operating effectiveness of controls over the Company's treasury and other related functions which directly impact the relevant account balances and transactions including hedge accounting.
The Company uses derivative financial instruments to mitigate foreign currency risk and interest rate risk primarily through foreign currency forward exchange contracts and interest rate swaps.  For selected samples obtained external confirmations from counterparties of the year end positions as well as agreed to original agreements.
 Performed sample tests of valuation and accounting
Further the Company has been using hedge relationship designation as per criteria set out in relevant Indian accounting standards.of these transactions. In doing so we have involved valuation specialists to assist us in carrying out aforesaid procedure as considered necessary.
Accounting thereof and related presentation and disclosures of these transactions require significant judgement. Assessed the adequacy of disclosures in the financial statements in respect of both nonderivative and derivative financial instruments.
Given the significant level of judgement and estimation involved and the quantitative significance we have determined this to be a key audit matter.
Impact of adopting the new income tax regime See notes 17 and 29 to the standalone financial statements.In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
With effect from financial year 2019-2020 the Income Tax Act provides an option of paying income taxes at a lower rate subject to complying with certain prescribed conditions ('new tax regime'). The Company has opted to shift to the new tax regime from a financial year in the future. Examined the implications of the new provisions on the tax position of the Company to assess the impact of adopting the new tax regime from the specified future financial year.
 Obtained budgets/ business plans underlying the projections prepared by the Company
Accordingly the deferred tax balances which are expected to reverse subsequent to the Company shifting to the new tax regime in the specified future year were remeasured and the consequential amount was recognised in the Standalone Statement of Profit and Loss of the current year. This amount is considered to be significant. Challenged key assumptions used in the projections based on business plans historical data and trends based on our knowledge of business.
 Assessed the recoverability of MAT credit entitlement (an item of deferred tax assets) against the forecast future taxable profits.
The determination of the point in time at which the Company would shift to the new tax regime involves significant judgement and estimation [including consideration of uncertainties associated with COVID 19 pandemic refer note 41(g)] regarding forecasting future taxable profits and realisation of MAT credit entitlement (an item of deferred tax assets). Since the impact of remeasurement of deferred tax balances as stated above is sensitive to these judgements and estimates it affects the amount of deferred tax balances (including MAT credit) that are reversed in the Standalone Statement of Profit and Loss of the current year. Assessed the adequacy of related disclosures in the standalone financial statements.
Given the significant level of judgement involved and the quantitative significance we have determined this to be a key audit matter.

Other Information

The Company's management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company's annual report but does not include the financial statements and our auditors' report thereon.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If based on the work we have performed we conclude that there is a material misstatement of this other information we are required to report that fact. We have nothing to report in this regard.

Management's and Board of Directors' Responsibility for the Standalone Financial Statements

The Company's Management and Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs profit and other comprehensive income changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring accuracy and completeness of the accounting records relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements the Management and Board of Directors are responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing 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 standalone financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

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

 identify and assess the risks of material misstatement of the standalone financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal controls.

 obtain an understanding of internal controls relevant to the audit in order to design 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 company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.

 evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures in the standalone financial statements made by the Management and Board of Directors.

 conclude on the appropriateness of the Management's and Board of Director's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the standalone 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's report. However future events or conditions may cause the Company to cease to continue as a going concern; and

 evaluate the overall presentation structure and content of the standalone financial statements including the disclosures and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal controls that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors' Report) Order 2016 (the Order) issued by the Central Government in terms of section 143 (11) of the Act we give in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.

2. (A) 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 best of 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 the Company so far as it appears from our examination of those books;

c) the standalone balance sheet the standalone statement of profit and loss (including other comprehensive income) the standalone statement of changes in equity and the standalone statement of cash flows dealt with by this Report are in agreement with the books of account.

d) in our opinion the aforesaid standalone financial statements comply with the Ind AS specified under section 133 of the Act.

e) on the basis of the written representations received from the directors as on 31 March 2020 taken on record by the Board of Directors none of the directors is disqualified as on 31 March 2020 from being appointed as a director in terms of Section 164(2) of the Act; and

f) with respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls refer to our separate Report in Annexure B.

(B) With respect to the other matters to be included in the Auditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to the best of our information and according to the explanations given to us:

i. the Company has disclosed the impact of pending litigations as at 31 March 2020 on its financial position in its standalone financial statements - Refer Note 31 to the standalone financial statements.

ii. the Company has made provision as required under the applicable law or accounting standards for material foreseeable losses if any on longterm contracts including derivative contracts- Refer Note 38 to the standalone financial statements.

iii. there have been no delays in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company; and

iv. the disclosures in the standalone financial statements regarding holdings as well as dealings in specified bank notes during the period from 8

November 2016 to 30 December 2016 have not been made in these financial statements since they do not pertain to the financial year ended 31 March 2020.

(C) With respect to the matter to be included in the Auditors' Report under section 197(16):

In our opinion and according to the information and explanations given to us the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limits laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) which are required to be commented upon by us.

For B S R & Co. LLP

Chartered Accountants ICAI Firm Registration No.: 101248W/W-100022

Kaushal Kishore
Partner
Place: DelhiMembership No.: 090075
Date: 4 June 2020UDIN: 20090075AAAAAJ8563

Annexure A to the Independent Auditors' report on the standalone financial statements of SRF Limited for the year ended 31 March 2020

Statement on matters specified in paragraphs 3 and 4 of the Companies (Auditors' Report) Order 2016 (the Order) issued by the Central Government in terms of section 143 (11) of the Act

(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements' section of our report of even date)

(i) a) According to the information and explanations given to us the Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets (property plant and equipment).

b) According to the information and explanations given to us the Company has a regular programme of physical verification of its property plant and equipment by which all fixed assets (property plant and equipment) are verified in a phased manner over a period of three years. In our opinion this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this programme certain assets have been physically verified by the Management during the current year. As informed to us no material discrepancies were noticed on such verification.

c) According to the information and explanations given to us and the records examined by us and based on the examination of the registered sale deed / transfer deed / conveyance deed/ lease deed provided to us we report that the title deeds comprising all the immovable properties (land and buildings) which are freehold/ leasehold are held in the name of the Company as at the balance sheet date except the following:

Particulars of the land and buildingGross Block 31 March 2020Net Block 31 March 2020Remarks
(Rs in Crores)(Rs in Crores)
Land at Gummudipoondi1.211.21Out of the Industrial freehold land measuring 32.41 acres at the Company's plant in Gummidipoondi the Company does not have clear title to 2.43 acres.
Land at Bharuch Dahej108.55 (Carried cost)108.55 (Carried cost)The execution of lease deed of land in respect of 1149550 square meters of leasehold land allotted to the Company by Gujarat Industrial Development Corporation at Dahej Gujarat is pending.

(ii) The inventories except goods in transit have been physically verified by the management during the year. In our opinion the frequency of such verification is reasonable. According to the information and explanations given to us the discrepancies noticed on verification between the physical stocks and the book records were not material and have been properly dealt with in the books of account.

(iii) The Company has not granted any loans secured or unsecured to companies firms limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act 2013. Accordingly paragraph 3 (iii) of the Order is not applicable.

(iv) In our opinion and according to the information and explanations given to us the Company has complied with the provisions of Sections 185 and 186 of the Companies Act 2013 in respect of grant of loans making investments and providing guarantees and securities.

(v) According to the information and explanations given to us the Company has not accepted any deposits from the public. Accordingly paragraph 3(v) of the Order is not applicable.

(vi) The Central Government has prescribed the maintenance of cost records under sub-section (1) of section 148 of the Act for activities carried out by the Company. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 148 of the Act and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However we have not made a detailed examination of the cost records.

(vii) According to the information and explanations given to us in respect of statutory dues:

(a) According to the information and explanations given to us and on the basis of our examination of the records of the Company amounts deducted / accrued in the books of account in respect of undisputed statutory dues including Provident fund Employees' state insurance Income-tax Sales-tax Goods and Services Tax (GST) Service tax Duty of customs Duty of excise Value added tax Cess and other material statutory dues as applicable have generally been regularly deposited during the year by the Company with the appropriate authorities.

According to the information and explanations given to us no undisputed amounts payable in respect of Provident fund Employees' state insurance Income- tax Sales-tax GST Service tax Duty of customs Duty of excise Value added tax Cess and other material statutory dues as applicable were in arrears as at 31 March 2020 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us there are no dues in respect of Income-tax Sales-tax Service tax Duty of custom Duty of excise GST and Value added tax as applicable which have not been deposited with the appropriate authorities on account of any dispute except for the following:

Name of the StatuteNature of the DuesForum where Dispute is pendingPeriod to which the amount relates (various years covering the period)Amount* (Rs Crores)
Central Excise LawsExcise DutyCustoms Excise & Service Tax Appellate Tribunal (CESTAT)1994-201515.81
Upto Commissioner (Appeals)1993-19977.63
Service Tax LawsService TaxUpto Commissioner (Appeals)2006-20100.13
Customs Excise & Service Tax Appellate Tribunal (CESTAT)2008-20120.98
Customs LawsCustoms DutyCustoms Excise & Service Tax Appellate Tribunal (CESTAT)2012-20131.27
Upto Commissioner (Appeals)2002-20130.18
Sales Tax LawsSales TaxSales Tax Appellate Tribunal1993-20173.05
Upto Commissioner (Appeals)1988-20162.32
Income Tax LawsIncome TaxSupreme CourtAY 1989-19901.13
High CourtAY 2000-20023.72
Income Tax Appellate Tribunal (M)AY 2014-20150.11
Dispute Resolution Panel (DRP)AY 2016-20174.04
OthersElectricity CessHigh Court2007-20140.06
Goods & Service tax LawsGoods &Upto Commissioner (Appeals)2018-20190.05
Service tax

The following matters which have been excluded from the above table have been decided in favour of the Company but the department has preferred appeals at higher levels:

Name of the StatuteNature of the duesForum where Dispute is pendingPeriod to which the amount relates (various years covering the period)Amount*
(Rs Crores)
Income Tax LawsIncome TaxHigh CourtAY 2003-20041.83
Central Excise LawsExcise DutyHigh Court1994-19951.18
Upto Commissioner (Appeals)1989-19952.24

*Amount as per demand orders including interest and penalty wherever quantified in the Order.

(viii) According to the information and explanations given to us the Company has not defaulted in repayment of loans or borrowings to its bankers or to any financial institutions and dues to debenture holders. The Company did not have any loans or borrowings from government during the year.

(ix) According to the information and explanations given to us and on the basis of our examination of the records of the Company the term loans have been applied by the Company during the year for the purposes for which they were raised. Further the Company has not raised any money by way of initial public offer / further public offer (including debt instruments) during the year.

(x) According to the information and explanations given to us no fraud by the Company and no material fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) According to the information and explanations given to us and on the basis of our examination of the records of the Company the managerial remuneration has been paid or provided by the Company in accordance with the provisions of section 197 read with Schedule V to the Companies Act 2013.

(xii) According to the information and explanations given to us the Company is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and on the basis of our examination of the records of the Company all transactions with the related parties are in compliance with Section 177 and 188 of the Act where applicable the details of such transactions have been disclosed in the standalone financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and based on our examination of the records of the Company the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures under Section 42 of the Act during the year. Accordingly paragraph 3(xiv) of the Order is not applicable.

(xv) According to the information and explanations given to us during the year the Company has not entered into any non-cash transactions with its directors or persons connected with them. Accordingly paragraph 3 (xv) of the Order and provisions of section 192 of the Companies Act 2013 are not applicable.

(xvi) According to the information and explanations given to us the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

For B S R & Co. LLP

Chartered Accountants ICAI Firm Registration No.: 101248W/W-100022

Kaushal Kishore
Partner
Place: DelhiMembership No.: 090075
Date: 4 June 2020UDIN: 20090075AAAAAJ8563

Annexure B to the Independent Auditors' report on the standalone financial statements of SRF Limited for the year ended 31 March 2020

Report on the internal financial controls with reference to the aforesaid standalone financial statements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013

[Referred to in paragraph 2(A)(f) under 'Report on Other Legal and Regulatory Requirements' section of our report of even date]

Opinion

We have audited the internal financial controls with reference to financial statements of SRF Limited (the Company) as of 31 March 2020 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

In our opinion the Company has in all material respects adequate internal financial controls with reference to financial statements and such internal financial controls were operating effectively as at 31 March 2020 based on the internal financial controls with reference to financial statements criteria established by the Company considering the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (the Guidance Note).

Management's Responsibility for Internal Financial Controls

The Company's management and the Board of Directors are responsible for establishing and maintaining internal financial controls based on the internal financial controls with reference to financial statements criteria established by the Company considering the essential components of internal controls stated in the Guidance Note. These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to Company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Companies Act 2013 (hereinafter referred to as the Act).

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financial controls with reference to financial statements based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing prescribed under section 143(10) of the Act to the extent applicable to an audit of internal financial controls with reference to financial statements. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls with reference to financial statements were established and maintained and whether such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls with reference to financial statements and their operating effectiveness. Our audit of internal financial controls with reference to financial statements included obtaining an understanding of such internal financial controls assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal controls based on the assessed risk. The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement of the standalone financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's internal financial controls with reference to financial statements.

Meaning of Internal Financial controls with Reference to Financial Statements

A company's internal financial controls with reference to financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial controls with reference to financial statements include those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition use or disposition of the company's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial controls with Reference to Financial Statements

Because of the inherent limitations of internal financial controls with reference to financial statements including the possibility of collusion or improper management override of controls material misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of the internal financial controls with reference to financial statements to future periods are subject to the risk that the internal financial controls with reference to financial statements may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

For B S R & Co. LLP

Chartered Accountants ICAI Firm Registration No.: 101248W/W-100022

Kaushal Kishore
Partner
Place: DelhiMembership No.: 090075
Date: 4 June 2020UDIN: 20090075AAAAAJ8563

   

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