To the Members of Srikalahasthi Pipes Limited
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of Srikalahasthi Pipes Limited("the Company") which comprise the balance sheet as at March 31 2019 and thestatement of Profit and Loss(including other Comprehensive Income) statement of changesin equity and statement of cash flows for the year then ended and notes to the financialstatements including a summary of significant accounting policies and other explanatorynotes for the year ended on that date (hereinafter referred to as "financialstatements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the 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 2019 and profit changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditors' Responsibilities for the Audit of theStandaloneFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current year. 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 matters. Wehave considered the matters described below to be the Key Audit Matters for incorporationin our Report.
|Key Audit Matter ||Addressing the key audit matter |
|Inventory determination and Valuation || |
|The total inventory of the Company amounting to Rs. 35267.97 lakhs (as on March 31 2019) forms about 16.14% of the total assets of the Company. ||Our Audit procedures based on which we arrived at the conclusion regarding reasonableness of Inventory valuation include the following: |
|This includes bulk materials such as coal coke iron ore etc which are susceptible to handling loss moisture loss/ gain spillage etc. and determination of the same requires estimation based on experience and technical expertise. || |
| || The Company deployed an Independent agency for verification of Bulk Materials during which we were present to oversee the process of the verification. |
| || We reviewed the report submitted by external agency and obtained reasons/explanation for variations observed by then with respect to book stock. |
| || The materiality for variations after considering the reasonable allowance for volumetric measurement were duly considered. |
| || We examined the whole valuation process/ methodology and checks being performed at multiple levels to ensure that the valuation is consistent as per the policy followed in this respect. |
Information Other than the Standalone Financial Statements and Auditors' Report Thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Board's Report including Annexuresto Board's Report and Management Discussion and Analysis Report but does not include thestandalone financial statements and our auditors' report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of the Management and those charged with governance for the StandaloneFinancial 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 ofthese Standalonefinancial statements that give a true and fair view of the state ofaffairs (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 accounting Standardsspecified 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 statement that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the Standalonefinancial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditors' Responsibility 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 auditors' 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 skepticism 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 Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls system in place and the operatingeffectiveness of such controls;
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management;
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe 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; and
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
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 Companies Act 2013 we give in the "Annexure A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
2. Further to our comments in the annexure referred to in the paragraph above asrequired by Section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c) The Balance Sheet the Statement of Profit and Loss (including Other ComprehensiveIncome) and the Cash Flow Statement dealt with by this Report are in agreement with thebooks of account;
d) In our opinion the aforesaid Standalone financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014;
e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct; and
f) Regarding adequacy of the internal financial controls with reference to financialstatements of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal control with referenceto financial statements.
3. 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. 38 to the Standalonefinancialstatements;
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts - Refer Note no. 37 to the Standalonefinancial statements; and
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
4. With respect to the reporting under section 197(16) of the Act to be included in theAuditors' Report In our opinion and according to the information andexplanations given tous the remuneration (including sitting fees) paid by the Company to its Directors duringthe current year is in accordance with the provisions of section 197 of the Act and is notin excess of the limit laid down therein.
ANNEXURE "A" TO THE AUDITORS' REPORT OF EVEN DATE:
i) a. The Company has maintained proper records showing full particulars includingquantitative details and situations of fixed assets.
b. The Company has a program of verification to cover all the items of fixed assets ina phased manner which in our opinion is reasonable having regard to the size of thecompany and the nature of its assets. Pursuant to this program certain fixed assets havebeen physically verified by the management during the year. According to the informationand explanation given to us no material discrepancies were noticed on such verifications.
c. According to the information and explanations given to us the records examined byus and based on the conveyance deeds provided to us we report that the title deedscomprising all the immovable properties of land and building which are freehold are heldin the name of the Company as on the balance sheet date.
ii) As informed the inventories of the Company except for materials in transit andthose lying in depot have been physically verified by the management during the year. Inour opinion and according to the information and explanations given to us the frequencyof such verification is reasonable.As the Company's inventory of raw materials comprisesmostly of bulk materials such as coal coke iron ore etc. requiring technical expertisefor quantification the Company has hired an independent agency for the physicalverification of the stock of these materials. The discrepancies noted on such verificationhave been properly dealt with in the books of the account.
iii) The Company has not granted any loans secured or unsecured to companies firms orparties covered in the register maintained under Section 189 of the Act. Accordinglyclause 3 (iii) of the Order is not applicable to the Company.
iv) In our opinion and according to the information and explanations given to us theCompany has not granted any loans made investments or provided any guarantees/securitiesto parties covered under Section 185 and 186 of the Act. Accordingly clause 3
(iv) of the Order is not applicable to the Company.
v) The Company has not accepted any deposits during the year and does not have anyunclaimed deposits as at March 31 2019 from public covered under Sections 73 to 76 or anyother relevant provisions of the Act and rules framed thereunder and therefore theprovisions of clause 3(v) of the Order is not applicable to the company
vi) We have broadly reviewed the books of account maintained by the company pursuant tothe Rules made by the Central Government for the maintenance of cost records under Section148 (1) of the Act in respect of the Company's products to which the said rules are madeapplicable and are of the opinion that prima facie the prescribed records have beenmaintained. We have however not made a detailed examination of the said records with aview to determine whether they are accurate or complete.
vii) a. According to the information and explanations given to us during the year theCompany has generally been regular in depositing with appropriate authorities undisputedstatutory dues including Provident Fund Investor Education Protection fund Employees'State Insurance Income Tax Sales Tax Wealth Tax Goods and Service Tax Service taxCustom Duty Excise Duty Value Added Tax Cess and other material statutory dues asapplicable to it.
b. According to the information and explanations given to us the details of disputeddues of sales tax income tax customs duty wealth tax excise duty service tax andCess if any as at March 31 2019 are as follows:
|Name of the Statute ||Nature of Dues ||Amount (Rs. in lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|The Central Excise Act' 1944 ||Service Tax ||400.50 ||2006-2007 To 2015-2016 ||Commissioner (Appeals) |
|The Central Excise Act' 1944 ||Excise Duty ||3.76 8.25 ||2015-2016 2007-2008 ||Commissioner (Appeals) |
|Central Sales Tax ||Sales Tax ||151.60 ||2000-2001 2010-2011 ||High Court |
| || ||2.75 ||2012-2013 ||Appellate Deputy Commissioner |
| || ||399.23 ||2003-2004 2004-2005 || |
|2005-2006 ||Sales Tax Appellate Tribunal || || || |
|Andhra Pradesh General Sales Tax Act 1957 ||Sales Tax ||440.98 ||2013-2014 2014-2015 ||Appellate Deputy Commissioner |
| || ||393.91 ||1999-2000 2000-2001 2003-2004 ||Sales Tax Appellate Tribunal |
| || ||10.59 ||2004-2005 ||High Court |
|Andhra Pradesh Value Added Tax Act 2005 ||Value Added Tax ||- ||2012-2013 2014-2015 ||Appellate Deputy Commissioner |
| || ||189.81 ||2005-2006 2007-2008 2011-2012 2013-2014 ||Sales Tax Appellate Tribunal |
|Income Tax Act 1961 ||Income Tax ||37.72 ||2003-2004 2004-2005 ||High Court |
viii) In our opinion and on the basis of information and explanations given to us bythe management we are of the opinion that the Company has not defaulted in repayment ofdues to financial institutions banks or debenture holders.
ix) In our opinion and according to the information and explanations given to us thecompany did not raise any money by way of initial public offer or further public offer(including debt instruments) or term loans during the year. However term loans raisedduring the year pending utilization for the intended use has been kept invested in FixedDeposits as stated in Note no. 12.2 of the Standalone financial statements.
x) During the course of our examination of books of account carried out in accordancewith generally accepted auditing practices in India we have neither come across anyincidence of fraud on or by the Company nor have we been informed of any such cases by themanagement.
xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Act.
xii) The Company is not a Nidhi company and hence reporting under paragraph 3(xii) ofthe Order is not applicable to the Company.
xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with Section 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the Standalone Financial statements as required by theapplicable accounting standards.
xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly clause 3 (xiv) of the Order is not applicable to the Company.
xv) According to the information and explanations given to us and as represented to usby the management and based on our examination of the records of the Company the Companyhas not entered into non-cash transactions with directors or persons connected with him.Accordingly paragraph 3(xv) of the Order is not applicable.
xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
ANNEXURE "B" TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph (f) under 'Report on Other Legal and Regulatory Requirements'of our report of even date)
Report on the Internal Financial Controls with reference to financial statements underClause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls with reference to financial statementsof Srikalahasthi Pipes Limited ("the Company") as at March 31 2019 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India and the Standards on Auditing prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls with reference to 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 system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditors'judgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemwith reference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
A company's internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Standalone financial statements for external purposes inaccordance with generally accepted accounting principles. A company's internal financialcontrol with reference to financial statements includes those policies and procedures that(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and 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 the Standalonefinancial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls with reference tofinancial statements 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 statements to future periods are subject to the risk that theinternal financial control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem with reference to financial statements and such internal financial controls withreference to financial statements were operating effectively as at March 31 2019 basedon the internal control with reference to financial statements 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.
| ||For Lodha & Co |
| ||Chartered Accountants |
| ||Firm's ICAI Registration No.:301051E |
|Place: Chennai ||R. P. Singh |
|Date: May 08 2019 ||Partner |
| ||Membership No: 52438 |