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Stovec Industries Ltd.

BSE: 504959 Sector: Industrials
NSE: N.A. ISIN Code: INE755D01015
BSE 00:00 | 03 Feb 2118.00 3.00
(0.14%)
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NSE 05:30 | 01 Jan Stovec Industries Ltd
OPEN 2115.00
PREVIOUS CLOSE 2115.00
VOLUME 296
52-Week high 2900.00
52-Week low 2100.00
P/E 20.05
Mkt Cap.(Rs cr) 443
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 2115.00
CLOSE 2115.00
VOLUME 296
52-Week high 2900.00
52-Week low 2100.00
P/E 20.05
Mkt Cap.(Rs cr) 443
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Stovec Industries Ltd. (STOVECINDS) - Auditors Report

Company auditors report

To the Members of Stovec Industries Limited

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion

We have audited the accompanying financial statements of Stovec Industries Limited("the Company") which comprise the Balance Sheet as at December 312021 theStatement of Profit and Loss including the statement of Other Comprehensive Income theCash Flow Statement and the Statement of Changes in Equity for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information (herein referred to as 'financial statements').

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 theCompanies Act 2013 as amended ("the Act") in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia of the state of affairs of the Company as at December 31 2021 its profitincluding other comprehensive income its cash flows and the changes in equity for theyear ended on that date.

Basis for Opinion

We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) as specified under section 143(10) of the Act. Our responsibilities underthose Standards are further described in the 'Auditor's Responsibilities for the Audit ofthe Financial Statements' section of our report. We are independent of the Company

in accordance with the 'Code of Ethics' issued by the Institute of CharteredAccountants of India together with the ethical requirements that are relevant to our auditof the financial statements under the provisions of the Act and the Rules thereunder andwe have fulfilled our other ethical responsibilities in accordance with these requirementsand the Code of Ethics. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion on the financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements for the financial year endedDecember 312021. These matters were addressed in the context of our audit of thefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. For each matter below our description of how ouraudit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the financial statements section of ourreport including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the financial statements. The results of our audit procedures includingthe procedures performed to address the matters below provide the basis for our auditopinion on the accompanying financial statements.

Key audit matters How our audit addressed the key audit matter
Recognition of revenue from contracts with customers for sale of textile machinery (refer note 3.06 18 and 31 of the financial statements)
Revenue from sale of textile machinery of Rs 511.99 million is recognized in accordance with Ind AS 115 Revenue from Contracts with Customers based on the dispatch/delivery of machines on completion of manufacturing (at a point in time). Our audit procedures included but were not limited to:
A certain portion of revenue is also deferred and recognised when the installation is completed to the satisfaction of the customers. • Obtained understanding and tested design and operating effectiveness of internal controls over revenue recognition.
We consider revenue recognition from such contracts to be a Key Audit Matter because management's assessments and terms of contracts significantly impact the determination of the performance obligations related to the individual contracts which critically affects the revenue recognised for the year. These assessments include in particular the scope of deliveries and services required to fulfil contractually defined obligations. • Assessed revenue recognition accounting policy to be compliance with Ind AS 115.
• Performed tests of details on a sample basis verified the underlying customer contracts and relevant supporting documents to analyse the dispatch/delivery conditions i.e. point in time and distinct performance obligations under contract.
• Evaluated management assumption for the allocation of transaction price between various performance obligation including variable consideration.
• Obtained and verified documents supporting dispatch / delivery of the machines. Obtained and read installation report and other relevant documents maintained by the Company installation of machines.
• Assessed the relevant disclosures made by the company in accordance with Ind AS 115.
Key audit matters How our audit addressed the key audit matter
Valuation of inventories and allowance for receivables (refer note 43 of the financial statements)
Due to continuing effect of COVID-19 pandemic Textile industry has been affected. Accordingly there has been slow moving and non-moving of certain inventories and delay in recovery of receivables. As at December 312021 the carrying amount of inventories was Rs 394.26 million net of write downs. Further the carrying amount of receivable amounting to Rs 313.22 million net allowance for receivable of Rs 11.09 million as at December 312021. Our audit procedures included but were not limited to:
The Company writes down inventories based on policy due to various reasons viz: slow-moving non-moving etc. as well as makes provision for overdue trade receivables based on policy past experience current trend and future expectations. • Obtained an understanding evaluated the design and tested the operating effectiveness of controls that the Company has in relation to written down of inventories valuation and allowance of receivable.
Accordingly the assessment of valuation of inventories and allowance for receivables especially due Covid-19 period requires significant management judgment and hence same is considered as Key Audit Matter. • Tested the aging report of inventories and receivable and on sample basis tested the calculation of the inventory provision and receivable as per the policy of the Company.
• Obtained an understanding of management's estimate on business impact of COVID 19 pandemic on valuation of inventories and receivables.
• For specific provisions made on a sample basis assessed the basis assumption used by the management obtained and read management approvals.
• Assessed the Company's disclosures in Note 43 on impact of Covid-19 on the financial statement of the company.

INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Directors report including annexurethereto but does not include the financial statements and our auditor's report thereon.

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

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

RESPONSIBILITIES OF MANAGEMENT FOR THE 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 and presentation of these financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting 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 were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the financial statements that give a true and fairview and are free from material misstatement whether due to fraud or error.

In preparing the financial statements management is responsible for assessing theCompany'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 FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional 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 Act we are also responsible for expressing our opinion on whether the Companyhas adequate internal financial controls with reference to financial statements in placeand the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

• Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

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 for thefinancial year ended December 312021 and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould 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 required by section 143 (3) of the Act we report that:

(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose 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 the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;

(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under section 133 of the Act read with Companies (Indian AccountingStandards) Rules 2015 as amended;

(e) On the basis of written representations received from the directors as on December31 2021 and taken on record by the Board of Directors none of the directors isdisqualified as on December 31 2021 from being appointed as a director in terms ofsection 164(2) of the Act;

(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these financial statements and the operatingeffectiveness of such controls refer to our separate Report in "Annexure 2" tothis report;

(g) In our opinion the managerial remuneration for the year ended December 31 2021has been paid / provided by the Company to its directors in accordance with the provisionsof section 197 read with Schedule V to the Act; and

(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 financial statements - Refer note 29 to the financial statement s;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and

iii. There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the company.

For S R B C & CO LLP Chartered Accountants ICAI Firm Registration Number: 324982E/E300003
Place of Signature: Ahmedabad Date: February 25 2022 per Sukrut Mehta Partner Membership Number: 101974 UDIN: 22101974ADQGPW4108

ANNEXURE 1 REFERRED TO IN PARAGRAPH 1 OF REPORT ON OTHER LEGAL AND REGULATORYREQUIREMENTS OF OUR REPORT OF EVEN DATE OF STOVEC INDUSTRIES LIMITED FOR THE YEAR ENDEDDECEMBER 31 2021;

(i) a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment;

b) Property plant and equipment have been physically verified by the management duringthe year and no material discrepancies were identified on such verification;

c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment are held in thename of the company.

(ii) The inventory has been physically verified by the management during the year. Inour opinion the frequency of verification is reasonable. No material discrepancies werenoticed on such physical verification. Inventories lying with third parties have beenconfirmed by them as at year end and no material discrepancies were noticed in respect ofsuch confirmations.

(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 theAct. Accordingly the provisions of clause 3(iii)(a) (b) and (c) of the Order are notapplicable 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 guarantees and securities given in respect of which provisions ofsection 185 and 186 of the Act are applicable and hence not commented upon. In our opinionand according to the information and explanations given to us provisions of section 186of the Act in respect of investments made have been complied with by the company.

(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.

(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records undersection 148(1) of the Act related to manufacture and supply of textile machineriesspares and related services sugar screen organic and inorganic chemicals and are of theopinion that prima facie the specified accounts and records have been made andmaintained. We have not however made a detailed examination of the same.

(vii) a) According to the information explanation given to

us and on the basis of our examination of records of the Company amounts deducted /accrued in books of account in respect of undisputed statutory dues including providentfund employees' state insurance income-tax duty of custom goods and service tax cessand other material statutory dues are generally regularly deposited with governmentauthorities. b) According to the information and explanations given to us no undisputedamounts payable in respect of provident fund employee's state insurance income- taxgoods and services tax duty of custom cess and other material statutory dues wereoutstanding at the year end for a period of more than six months from the date theybecame payable.

c) According to the information and explanation and records of the Company the dues ofincome-tax value added tax duty of customs service tax and goods and services tax onaccount of any dispute which are not deposited are as follows:

Name of the statute Nature of the dues Amount (Rs in Million) Period to which the amount relates Forum where the dispute is pending
The Income Tax Act 1961 Income Tax 3.97 AY 2007-08 AY 2013-14 and AY 2017-18 Commissioner of Income Tax (Appeals)
The Finance Act 1994 Service Tax 0.45 FY 2012-13 FY 2013-14 FY 2014-15 Commissioner of Central Excise (Appeals)
Gujarat Value Added Tax Act Gujarat Value Added Tax 1.55 FY 2015-16 FY 2016-17 FY 2017-18 Commissioner of Gujarat Value Added Tax

Apart from above the Company has deposited Rs 1.65 million with various taxauthorities although the same have been disputed with the respective authorities.

(viii) The Company did not have any outstanding loans or borrowing dues in respect of afinancial institution or bank or to government or dues to debenture holders during theyear and hence reporting under clause (viii) is not applicable to the Company and hencenot commented upon.

(ix) According to the information and explanations given by the management and auditprocedures performed by us the Company has not raised any money way of initial publicoffer / further public offer / debt instruments and term loans and hence reporting underclause (ix) is not applicable to the Company and hence not commented upon.

(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the company or no material 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 and auditprocedures performed by us the managerial remuneration has been paid / 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 and hence reporting underclause (xii) is not applicable to the Company and hence not commented upon.

(xiii) According to the information and explanations given by the management and auditprocedures performed by us transactions with the related parties are in compliance withsection 177 and 188 of Act where applicable and the details have been disclosed in thenotes to the financial statements 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 under clause (xiv) are not applicable to the company andnot commented upon.

(xv) According to the information and explanations given by the management and auditprocedures performed by us the Company has not entered into any non-cash transactionswith directors or persons connected with him as referred to in section 192 of CompaniesAct 2013.

(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.

For S R B C & CO LLP Chartered Accountants ICAI Firm Registration Number: 324982E/E300003
Place of Signature: Ahmedabad Date: February 25 2022 per Sukrut Mehta Partner Membership Number: 101974 UDIN: 22101974ADQGPW4108

ANNEXURE 2 OF THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTSOF STOVEC INDUSTRIES 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 StovecIndustries Limited ("the Company") as of December 31 2021 in conjunction withour audit of the financial statements of the Company for the year 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 Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India.These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to the Company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required 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 financial statements based onour audit. We conducted our audit in accordance with the Guidance Note and the Standardson Auditing as specified under section 143(10) of the Act to the extent applicable to anaudit of internal financial controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting with reference tothese financial statements was established and maintained and if such controls operatedeffectively 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 financialstatements and their operating effectiveness. Our audit of internal financial controlsover financial reporting included obtaining an understanding of internal financialcontrols over financial reporting with reference to these financial statements assessingthe risk that a material weakness exists and testing and evaluating the design andoperating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial 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 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 thesefinancial statements is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sinternal financial control over financial reporting with reference to these financialstatements includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

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 financial statements including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of theinternal financial controls over financial reporting with reference to these financialstatements to future periods are subject to the risk that the internal financial controlover financial reporting with reference to these financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with : thepolicies 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 financial statements and suchinternal financial controls over financial reporting with reference to these financialstatements were operating effectively as at December 312021 based on the internalcontrol over financial : reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note.

For S R B C & CO LLP Chartered Accountants ICAI Firm Registration Number: 324982E/E300003
Place of Signature: Ahmedabad Date: February 25 2022 per Sukrut Mehta Partner Membership Number: 101974 UDIN: 22101974ADQGPW4108

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